I have found a gold forecaster with a 100% accuracy rate. Below is a chart of two of his recent predictions.
The first arrow marks the 15th of January when he said to "use narratives, not just charts, to tell if gold's bottom may be near", noting that mainstream commentary was a "precursor to more bullish narratives. It also gives confidence to smart money to start to get into the market"
The second arrow marks the 15th of March when he said that he "would not be surprised to see it correct down" and that "there will be corrections on the climb back up" during the rest of 2014.
Of course the forecaster is me, and the 100% accuracy rate is misleading as I've only made these two calls in the entire time I've blogged (
here and
here), but hey, since when does the full truth matter in click baiting headlines?
Now given that my sample size is only two forecasts, you can probably bet against my next call as there is no way I can maintain a 100% accuracy rate. I'm not ready to make a call for a bottom in this correction so at this time will just expand on the March 15 comments I made in an interview with Al Korelin.
In that interview I noted negative premiums on the SGE were possibly indicative of bullion banks having overestimated Chinese New Year demand (BBs stockpile ahead of these high demand periods, see
here for some evidence of this). Perth Mint has seen some on and off weakness in kilobar premiums recently and this was confirmed by Ed Steer
noting that JP Morgan received exactly 160,750.000oz of eligible gold into their Comex warehouse on March 20. This is exactly 5 tonnes, which readers of this blog
know is indicative of kilobars. If the Chinese are so hot for gold right now, why is JPM putting kilobars into a NY warehouse?
For a current read on the market I think you have to take a narrative approach I discussed in that January 15
article - and that is mainstream financial markets narratives, not goldbug narratives, as that is where the big money is. Where is that narrative now? First this Business Insider
article quoting Goldman:
"we see potential for a meaningful decline in gold prices towards the level implied by 10-year TIPS yields, which our rates strategists expect to rise further this year, and reiterate our year-end $US1,050/toz gold price forecast. More broadly, we believe that with tapering of the Fed’s QE, US economic releases are back to being a key driving force behind gold prices"
And this from the Australian Financial Review via
Macro Business, quoting some nobody and SocGen:
"Gold is going to be somewhat problematic from an investment standpoint over the next six to 12 months. We’re probably looking to a relatively higher and quicker increase on rates, which is a headwind for precious metals."
"We continue to believe that the economic momentum in the US shows further improvement, we reiterate our very bearish outlook for this year. Prices could drop below $US1,000. I would not rule that out."
The important thing is these people believe this stuff, that the US is "improving" and they will trade gold accordingly. I think it is also worth noting Dan Norcini's repeated comments that this price run up was more about short covering than new longs, and he is representative of the Comex floor "narrative".
I also note the Zero Hedge article on China Commodity Funding Deals regarding gold, which has some potential to be negative for gold, despite what some may say. Most likely their "don't worry, it is bullish for gold" interpretation comes from a lack of understanding of the deals as they probably haven't got access to the professional market commentary on that topic. That is for another post, but I will note I brought this issue to your attention in
September 2012 and ZH and others who are now jumping on it could have found out a lot earlier from these articles (good background reading if you're keen)
June 2013,
August 2013,
September 2013,
December 2013 and finally from Koos Jansen, who you'd think gold bloggers would read, with
this quote indicating the risk:
"some enterprises in China use gold leasing from banks to solve their short-term funding problems in the hope of buying back the gold at lower levels to repay the lease. However they can be short-squeezed when gold moves higher"
So at this stage I think the risk is to the downside but will hold off on a bottom call until I can see some shift in the mainstream narrative.
