Tag Archives: Wall Street

No Bear Market In Gold. “Bullish Sentiment” in the Market for Physical Gold Bullion

Posted on by

You know that gold bear market that the financial press keeps touting? The one George Soros keeps proclaiming? Well, it is not there. The gold bear market is disinformation that is helping elites acquire the gold.

Certainly, Soros himself doesn’t believe it, as the 13-F release issued by the Securities and Exchange Commission on May 15 proves. George Soros has significantly increased his gold holding by purchasing $25.2 million of call options on the GDXJ Junior Gold Miners Index.

In addition, the Soros Fund maintains a $32 million stake in individual mines; added 1.1 million shares of GDX (a gold miners ETF) to its holdings which now stand at 2,666,000 shares valued at $70,400,000; has 1,100,000 shares in GDXJ valued at $11,506,000; and 530,000 shares in the GLD gold fund valued at $69,467,000. [values as of May 17]

The 13-F release shows the Soros Fund with $239,200,000 in gold investments. If this is bearish sentiment, what would it take to be bullish?

The media reports that Soros had sold his gold holdings came from misinterpreting the reason Soros’ holdings in the GLD gold trust declined. Soros did not sell the shares; he redeemed the paper claims for physical gold. Watching the gold ETFs, such as GLD, being looted by banksters, Soros cashed in some of his own paper gold for the real stuff.

The giveaway that Soros is extremely bullish on gold comes not only from his extensive holdings, but also from his $25.2 million call option on junior gold stocks. This is a highly leveraged bet on the weakest gold mines. With high production costs and falling gold price from constant short selling in the paper market, Soros’ bet makes no sense unless he thinks gold is heading up as the short raids concentrate gold in elite possession.

In previous articles I have explained how heavy short-selling triggers stop-loss orders and margin calls on investors in gold ETFs. Scared out of their shares or forced out by margin calls, investors’ add to the downward price pressure caused by the shorts. Bullion banks and prominent investors such as Soros are the only ones who can redeem GLD shares for physical metal. They purchase the shares that are sold in response to the falling gold price, and present the shares for redemption in gold metal.

Insiders familiar with the process describe it as looting the ETFs of their gold basis.

In my last column I described how the orchestration of a falling gold price in the paper market protects the dollar’s value from the Federal Reserve’s policy of printing 1,000 billion new ones annually. The other beneficiary of the operation is the financial elite who buy up at low prices the ETF shares sold into a falling market and redeem them for gold. Like all other forms of wealth in the West, gold is being concentrated in fewer hands, while the elite shout “bear market, get out of gold.”

The orchestrated decline in gold and silver prices is apparent from the fact that the demand for bullion in the physical market has increased while short sales in the paper market imply a flight from bullion. As a hedge fund manager told me, it is a Wall Street axiom that volume follows price. Bull markets are characterized by rising prices on high volume. Conversely bear markets feature declining prices on low volume. The current bear market in gold consists of paper gold declining steadily while demand has escalated rapidly for physical metal. This strongly indicates that demand for physical gold continues to be in a bull market despite the savage attacks on paper gold.

If the orchestration is apparent to me, a person with no experience as a gold trader, it certainly must be apparent to federal regulators. But don’t expect any action from the Commodities Future Trading Corporation. It is headed by a former Goldman Sachs executive.

And don’t expect any investigation from the financial press. The financial press sees a bear market while supplies of bullion decline, premiums over spot rise, and even publicly declared bears such as George Soros make highly leveraged bets that will fail in the absence of a bull market in gold.

Source: http://www.globalresearch.ca/no-bear-market-in-gold-bullish-sentiment-in-the-market-for-physical-gold-bullion/5335795

email

Aussie Dollar Weakness A Dangerous Sign For Gold

Posted on by

The commodities front remains mixed as the U.S. dollar’s recent rally has put downward pressures on many resource prices. Furthermore, the ongoing bull run on Wall Street has prompted many investors waiting on the sidelines to jump into equities in lieu of chasing paltry yields in the bond market or lackluster returns in the commodities space.

Surprisingly, gold has managed to keep afloat in recent weeks amid the stock market euphoria, which is a commendable feat given the extreme selling pressures it saw earlier in April. The outlook for the yellow metal remains mixed, however, as technical patterns and currency market trends are hinting at another round of selling in the near future.

Seasoned gold traders are aware of the historically high correlation the metal exhibits relative to the Australian dollar, and as such, the recent weakness seen in this currency ought be treated as a potential signpost for further selling pressures in the gold market. The fundamental reason behind why the Aussie dollar bears a direct relationship with the price of gold is fairly straightforward; Australia is one of the largest producers of gold in the world, and as a result, its currency tends to follow the price of the yellow metal, although not necessarily in perfect tandem.

The Aussie dollar has been experiencing a steep sell-off over the past two weeks, whereas gold prices have dragged along sideways, thereby potentially hinting at an impending sell-off for the precious metal. Consider the three-year daily performance chart below for the currency pair Australian Dollar/U.S. Dollar:

Notice how the AUD/USD currency pair has been fairly range-bound, with resistance lying around 1.075 and support near 0.975.  Plain and simple, the Aussie dollar has more room to fall from a technical perspective, which should raise a few red flags for gold traders looking to buy into the yellow metal [see 5 Commodity Trading Mistakes You Could Be Making].

Although gold’s recent rally is certainly steep and encouraging, the yellow metal has a history of carving out multiple-bottoms before resuming its longer-term uptrend for good. The Aussie dollar sell-off does not by any means predict lower gold prices; however, it does hint at a higher possibility for a downturn in gold given the historically direct relationship between the two asset classes.

Source: http://commodityhq.com/2013/aussie-dollar-weakness-a-dangerous-sign-for-gold/

Why Wall Street is unmoved by gold fever

Posted on by

Imports to India, the biggest gold consumer by far, were running at five times average levels, according to investment bank UBS. Chinese smallholders used their May Day holiday not to head for the beach, as this column naively suggested last week, but to flood the gold dealers in Hong Kong. Turkey bought more gold in April than in any month since the fateful days of August 2008. And so on.

Were the financial pros back in New York and London impressed by this spontaneous outpouring of gold love? Not a bit.

The mood in Bloomberg’s weekly gold analysts’ poll darkened substantially in the May 2 results: 20 gurus predicted falling prices, against nine expecting a rise and four abstainers. A week earlier, the bulls and bears were evenly matched. The latest figures from the U.S. Commodities Futures Trading Commission, published April 30, show swap traders holding nearly twice as many short as long contracts on gold.

What might Wall Street know that moms and pops in developing markets do not? One hint comes from an interesting bit of research published by French bank BNP Paribas last week. It seems — and we should all be thrilled to know this — that structured finance has infected the ancient art of gold trading through an instrument known as a “reverse convertible note.”

This involves a financial institution lending cash to an asset buyer, at an elevated interest rate, but in return granting the buyer a put option to sell the lender said asset at a pre-agreed price. Investopedia tells us that RCNs “provide a predictable, steady income that can outpace traditional returns.”

Living with parents can lead to financial independence

There are more adult Americans age 34 or younger sleeping in their childhood bedrooms now than at any other time in the past 30 years, but it can lead to more saving in the long run.

Unless of course the value of the underlying asset falls sharply and the put option triggers. This is just what happened when gold started to tank a few weeks ago. “It’s hard to determine what was the biggest cause for gold’s decline, but structured products played a part in exacerbating the downward spiral,” BNP’s chief of commodity sales, Guillaume Picot, told Bloomberg.

But this latest necromancy with RCNs is just more proof of a bigger picture problem: professional and retail gold buyers are living in separate worlds psychically if not geographically. The pros measure gold’s performance against that of other assets, particularly stocks, and stocks have been killing gold for going on two years now. The S&P 500 SPX -0.37% has climbed by nearly 40% since Oct. 2011; the dominant SPDR Gold Shares ETF GLD -1.16% has lost 15%.

At a certain point all but the hard-core gold bugs will give up on the idea of the metal outperforming. The mid-April market panic seems to have been that point. All the more so as the main intellectual argument for gold — that central bank credit expansion will dilute “fiat” currencies and spur a new bout of monetary inflation — keeps stubbornly failing to come true.

The retail buyers lining up to grab gold at “bargain” prices don’t care about or trust stock markets, for the most part. In India, they are acting on a time-honored tradition that precious metal is a woman’s mad money, her potential salvation in the event of marital disaster or widowhood. Gold stashes are passed down from mother to daughter, or showered on brides as a wearable testament of financial independence. So consumers will always buy more if the price looks affordable.

The retail purchaser has the numbers in the world gold equation. ETF investors sold off 174 tons of metal in April, a record for them and enough to spur a market crash. But jewelry and gold-coin/bar buyers scooped up 222 tons in an average month last year. So a bull run at the shops can easily offset a bear patch on the Street in terms of raw demand.

But the pros can move the market more quickly with cascading instantaneous sell-offs of fund holdings or collateral on their reverse convertibles. Thus, the gold price plunged by 13% in two sessions between April 11-15, and has gained back only half that despite the masses’ positive response.

At the moment the market is in stalemate, having done basically nothing last week. The near-term outlook would have to be called a bit bearish. Institutional investors look determined to shave weightings on gold so long as equities stay buoyant. The retail frenzy has to calm eventually, especially as India’s spring wedding season is winding down this month.

Source: http://www.marketwatch.com/story/why-wall-street-is-unmoved-by-gold-fever-2013-05-0