Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Once Upon A Time There Were Philosopher Kings - 24th Nov 14
The 2014 Crude Oil Price Crash Explained - 24th Nov 14
China Stock Investing - Follow the Money! - 24th Nov 14
122 Tonnes of Gold Secretly Repatriated to Netherlands - 24th Nov 14
What Causes the U.S. Dollar to Move? - 24th Nov 14
Stock Market Indexes New Highs - Will Uptrend Extend Even Further? - 24th Nov 14
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14
Currency Wars, the Ruble and Keynes - 21st Nov 14
Stock Market Investor Sentiment in The Balance - 21st Nov 14
Two Biotech Stocks Set to Double on One Powerful Catalyst - 21st Nov 14
Swiss Gold Poll Likely Tighter Than Polls Suggest - 21st Nov 14
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

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

© 2005-2014 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

Free Report - Financial Markets 2014