Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Price Top Indicated by Record Trading Volume

Commodities / Gold & Silver 2009 Dec 10, 2009 - 07:33 AM GMT

By: Miles_Banner

Commodities

Best Financial Markets Analysis ArticleLast week we saw unusually high volumes of short sellers in the COMEX futures market. On Friday, 4 th December, we saw the biggest volume of sellers in the SPDR (GLD) ETF in its 5 year history. In four working days, between the 3 rd – 8 th December, Gold has had a sharp sell off, dropping more than $100. Together, these show the volatility of investment demand and draw into question whether this is a top for the gold price…


The SPDR Gold Shares (GLD) ETF is the second largest ETF in the world. Today the SPDR holds 1,116.25 tonnes of gold bullion. That’s more than the central banks of Russia, China and India [See the official central bank holdings here].

The size of the ETF means it weighs in with a heavy influence on the gold price. Commodity based ETFs are a fairly recent investment vehicle. Because of their easy access to commodity prices their popularities have risen sharply in their short lifetime. As they have risen so has the effect of investors who use them. Today traders in the GLD ETF can have a major influence on the price of gold which is why we turn our heads when they have such huge volumes (volume = number of shares traded during a period).

The normal day volume of trade is approximately 20m. On Friday that number had reached 79m.

Something similar was being reflected in the world’s largest futures and options exchange, the CME Group. On Friday it experienced record trading volumes for FX products. And in the Comex Gold Futures for February 2010 you can also see large spikes in volume (the grey underlying pattern in the chart below).

Source FT.com

These large volumes indicate a change. They show us that something is happening.

Can this be the gold price top?

ETFs are attractive to short term speculators because it is an easy way to get exposure to a commodity. Short term traders are, however, much more volatile in the reactions to market news. This means the gold price is partly built on an unstable demand. What we witnessed on Friday and throughout last week was mostly short term traders selling their gold positions on the back of news…

News this week which would have acted as drivers included the Fed Chairman Ben Bernanke claiming that inflation "appears likely to remain subdued for some time."

JPMorgan Chase (NYSE: JPM) said, "Fundamentally, the gold price appears over-valued."

Credit Suisse (NYSE: CS) stated "Gold may decline to $900 to $1,000 an ounce by the end of the first quarter next year."

And on Wednesday, 2nd December, the Telegraph reported that the vice governor of the People’s Bank of China, Hu Xiaolian said Beijing would not buy gold indiscriminately, suggesting it was in a bubble.

These parts of the news address underlying demand for gold: Bernanke’s claim about subdued inflation addresses the widely held view that gold is an inflation hedge; the banks statements suggest we’re in an overvalued gold bubble; and if a representative of the People’s bank of China indicates China is unwilling to acquire gold at its current price investors will remember China is known to need to acquire the yellow metal to bulk up its reserves. They are suppose to be buying on dips. In reaction people have started to sell their positions which has triggered the huge fall we witnessed.

The recent spat of selling will have involved a large amount of day traders and short term traders who have put in place stop losses, seeking to make a return on their profits. The higher the price of gold climbs you’ll see a larger amount of stop losses in place as people seek to protect their value. In our opinion only something similar to the Dubai crisis can prevent gold climbing higher.

As with all commodities the path will involve corrections… it will not be a smooth ride to the top. We mentioned last week that the investment demand has led to a much more volatile trader investing in gold. What the spikes in volume indicate is the investment demand that is determining the gold price is much more reactive to other factors happening in the market, and likely to experience wide swings in sentiment. Speculators are looking short term, they are driven by fear.

As a consequence the price can unravel rapidly. Whilst the recent events look like a top in the gold price, all bull markets will have corrections. Now doesn’t look like a time to panic… It may continue to decline for the near future, but the fundamentals are still in place and we’ve not seen the end of the giant hangover from quantitative easing. Until we do we believe the gold price will, once again, be hitting new highs soon.

Until next week,

Regards,

Digger Gold Price Today

P.S Digger writes a weekly email analysing the gold price and the gold industry. Visit Digger at Gold Price Today (http://goldpricetoday.co.uk).

© 2009 Copyright Gold Price Today - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules