Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench

Rusty Old Tin Can of Gold

IMG Auteur
Published : February 27th, 2013
777 words - Reading time : 1 - 3 minutes
( 6 votes, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

Gold has turned, apparently. Leveraged speculators in the futures market said so...

"To HOARDERS and speculators," says Time magazine, "gold lately has had about as much luster as a rusty tin can."

Rings true here in Feb. 2013. But this clanging bell – entitled
The Great Gold Bust, and drowned out as a signal to fill your boots only by the New York Times' infamous Who Needs Gold When We Have Greenspan? of May 1999 – was rung back in Aug. 1976, right at the bottom of a 50% pullback in the 1970s' long bull market in gold.

"In three chaotic days last week, gold fell $14 on the London market," Time explained almost 37 years ago, noting gold's plunge from $198 per ounce at the start of 1975.

Gold's new 31-month low of $105.50 an ounce "[was] a dismal figure for goldbugs," the magazine went on, "who not long ago were forecasting prices of $300 or more."

Spooky, no? "This is a commodity that people thought was going to $2000 an ounce and beyond," gasped a MarketWatch video at the WSJ just last week. "This was a commodity that was rising almost parabolically, exponentially...

"[Gold] has turned."

Well, perhaps. Gold's 21st century bull market has certainly lost its milk teeth. It was 10 years ago this month, in fact, that the number of bullish gold futures on the US Comex market held by professional speculators first broke above 100,000 contracts.

And to celebrate that anniversary, last week the number of bearish contracts held by that same group – professional speculators – leapt above 90,000 for the first time since mid-1999...

Coinciding with the New York Times' praise for Alan Greenspan versus gold, mid-1999 was in fact the only other time when speculative betting against the gold price reached last week's size.

Back then, as die-hard gold bugs will recall, Gordon Brown squished the price to 20-year low beneath $255 per ounce, announcing in advance that he would dump half the UK's gold reserves just as the Swiss voted to sell huge chunks of their massive gold reserves too.

Gold has come a long way since its Brown Bottom. But gold speculators and hoarders?

"Investors display lowest optimism about gold since end of 2008," says Commerzbank, looking at the net balance of bullish minus bearish bets held on the US futures market by Non-Commercial traders (aka hedge funds and other "managed money" traders). And no fooling...

The reasons for gold's new-found bearishness? In truth, it's been coming for 18 months, as analysts from Credit Suisse and Goldman Sachs will tell you, pointing to the price peak of – umm – 18 months ago a mere year-and-a-half after the, umm, peak. But what with gold prices failing to make new highs, the Eurozone crisis must be as near-to-finished as the broader global financial crisis. The US Fed is also about to start raising interest rates much sooner than anyone expected, driving a stake into the heart of the case for gold as cash-in-the-bank starts to pay a real return once again.

Or so runs the fast-rolling bandwagon. You can measure its momentum in the Net Long position of professional traders on the gold futures market. It shrank dramatically over the last 3 months, down 43% to its smallest level since just after Lehman's collapsed. That rate of change has been outpaced only 10 times in the last decade.

The average change in the gold price over the 3 months that followed? A tasty 7.8% on BullionVault's analysis today, with only 3 of those 10 occasions failing to deliver a positive 3-month return (and even then managing only a 2.1% drop).

Still, a gold bull market gripped the last decade, of course. And whether the recent bearishness will run deeper or turn tail, time will tell (or not. According to its online archive, Time magazine has given few column inches over to gold investing since the Sept. 2011 highs). Meanwhile, the bearish bandwagon may already have lost a wheel.
Italy's elections and the Fed chairman's latest speech today don't quite fit that consensus.

Straws in the wind maybe. But they don't quite fit a long-term drop in gold prices either. Which may be too bad for long-term gold buyers hoping for a proper pullback in prices, such as 1975-1977 offered.

(c) 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


Companies Mentionned : Signal |
Data and Statistics for these countries : Italy | All
Gold and Silver Prices for these countries : Italy | All
<< Previous article
Rate : Average note :5 (6 votes)
>> Next article
Adrian Ash is head of research at BullionVault.com, the fastest growing gold bullion service online. Formerly head of editorial at Fleet Street Publications Ltd – the UK's leading publishers of investment advice for private investors – he is also City correspondent for The Daily Reckoning in London, and a regular contributor to MoneyWeek magazine.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Something has Changed in Gold St...
06 Febneville
No nothing strange has happened in GOLD stocks....absolutely nothing.....The fact of the matter is that you byrne have been playing the man and...
The Revisionist Theory and Histo...
05 Febovertheedge
"The key is in the hand of the U.S. government. It is the same key that was used to lockthe U.S. Mint to silver in 1873, and to gold sixty years la...
First Report since April, 2014
05 FebS W.
Here I was just 2 days ago thinking whatever happened to that evangelical silver guy. Low and behold up he springs, like some spirit from the g...
LBMA Silver “Price”: A Perfect S...
03 FebS W.
There is no doubt that the Comex can be used as a casino for those who want to trade Silver up/or down or maybe some just wish to take a small punt...
LBMA Silver “Price”: A Perfect S...
30 JanOzSILV1
Bron refuses to EVER admit this market is a Casino and the disconnect between Paper and Physical is a big clue to this
LBMA Silver “Price”: A Perfect S...
30 JanS W.
Usually I enjoy Bron's take on things,but to be perfectly honest, I can't understand 95% of what he his on about here. I get the feeling that h...
ANOTHER NAIL IN THE U.S. EMPIRE ...
30 JanDemosthenes0
Very naive and pretentious article! The author thinks he knows everything and yet knows next to nothing. Shale gas producers are neither stupid n...
LBMA Silver “Price”: A Perfect S...
30 JanOzSILV1
I'd say that this was More than a Farce , 5,000 silver futures contracts within a minute or two !!!!! ( some charts indicate NO increase in Vo...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Lara Expl.(Cu-Zn-Au)LRA.V
Revised Resource Estimate Report Filed for Maravaia Copper Gold Deposit
CA$ 0.34+1.47%Trend Power :
Corporate news
Black HillsBKH
Black Hills reports 4Q loss
US$ 50.90-0.59%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
Gasoline Inventories Rose Last Week despite Fall in Production
US$ 24.85-6.44%Trend Power :
Corporate news
United States Steel(Fe-Sn)X
U.S. Steel (X) States Ratification of Labor Agreements
US$ 7.94-3.64%Trend Power :
Corporate news
Black HillsBKH
4:34 pm Black Hills Corp beats by $0.04, misses on revs; guides FY16 EPS below consensus
US$ 50.90-0.59%Trend Power :
Corporate news
Black HillsBKH
Black Hills Corp. Reports 2015 Fourth Quarter and Full Year Results
US$ 50.90-0.59%Trend Power :
Corporate news
Transcanada PipelinesTRP.TO
TransCanada to Sign Substantial Agreement to Benefit Québec Economy
CA$ 48.65+0.16%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
4Q15 Crude Oil Prices: Fallout for the Energy Sector and SPY
US$ 24.85-6.44%Trend Power :
Corporate news
Comments closed