Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Rusty Old Tin Can of Gold

Commodities / Gold and Silver 2013 Feb 26, 2013 - 11:41 PM GMT

By: Adrian_Ash

Commodities

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.


the Great Gold Bust

"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...

Betting Against Gold

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...

Betting Less on Gold

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.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 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.

Adrian Ash Archive

© 2005-2016 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

Catching a Falling Financial Knife