Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15
Stock Traders Flock to Gold GLD ETF - 24th Jan 15
10 Reasons Why You Need an Offshore Bank Account - 24th Jan 15
Goldman Sachs Blankfein - Regulation is Like Background Noise - 24th Jan 15
Gold in Euros Surges As ECB To Print Trillion Euros and Greek Election This Sunday - 24th Jan 15
Gold Bear Market Rally or New Bull ? - 24th Jan 15
Euro-zone 'QE already Working' Says IMF Lagarde - 23rd Jan 15
ECB and EU LTRO and QE for Dummies: Or, Make These Trades - 23rd Jan 15
Debt and Deflation: Three Financial Forecasts - There's More Than Falling Prices - 23rd Jan 15
Market Should Not Doubt' Mario Draghi ECB QE - 23rd Jan 15
Francs, Bonds, Barrels, and Bail-Ins - 23rd Jan 15
Are Plunging Petrodollar Revenues Behind the Fed’s Projected Rate Hikes? - 22nd Jan 15
Stocks Bear Market Lessons from History - 22nd Jan 15
Russia's Plans for Arctic Supremacy - 22nd Jan 15
166 Trillion Reasons Why Bank Stocks Are So Cheap - 22nd Jan 15
Will Gold Price Break Out Once Again? - 22nd Jan 15
The Cult of Central Banking - 21st Jan 15
Five Stock Market Questions Wall Street Hopes You’ll Never Ask - 21st Jan 15
China's Yuan Enters the Currency "Big Leagues" to Take on the Dollar - 21st Jan 15
Investor implications of QE by the ECB - 21st Jan 15
Deflation Bonanza! And the Fool's Mission to Stop It - 21st Jan 15
Messin' With My Financial Brain - 21st Jan 15
Are Stock Market Buyouts Checking Out? - 20th Jan 15
Legal “Steroids” Are Making This Tech Stock a “Buy” - 20th Jan 15
Are Stock Market Storm Clouds Massing? - 20th Jan 15
The Swiss Release the Kraken! - 20th Jan 15
The European Union, Nationalism and the Crisis of Europe - 20th Jan 15
Swiss Say No to QE - 20th Jan 15
Gold Demand Explodes as Volatility and Fear Stalk Market - 20th Jan 15
The Truth About This Stock Market "Meltdown" Indicator - 20th Jan 15
Markets 2015 More Of The Same? - 20th Jan 15
Is Market Sentiment Shifting to Gold? - 20th Jan 15
U.S. Dollar’s Major Breakout and Gold’s Simultaneous Rally - 19th Jan 15
Silver Price Breaks Out on Swiss France Euro Decoupling - 19th Jan 15
Gold Bullish Inverse Head and Shoulders Pattern - 19th Jan 15
Bundesbank Announces Repatriation of 120 Tonnes of Gold from Paris and New York Federal Reserve - 19th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of US Markets 2015 Report

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