Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20
AMD is KILLING Intel as Ryzen Zen 3 Takes Gaming Crown, AMD Set to Achieve CPU Market Dominance - 13th Oct 20
Amazon Prime Day Real or Fake Sales to Get Rid of Dead Stock? - 13th Oct 20
Stock Market Short-term Top Expected - 13th Oct 20
Fun Stuff to Do with a Budgie or Parakeet, a Child's Best Pet Bird Friend - 13th Oct 20
Who Will Win the Race to Open a Casino in Japan? - 13th Oct 20
Fear Grips Stock Market Short-Sellers -- What to Make of It - 12th Oct 20
For Some Remote Workers, It Pays to Stay Home… If Home Stays Local - 12th Oct 20
A Big Move In Silver: Watch The Currency Markets - 12th Oct 20
Precious Metals and Commodities Comprehensive - 11th Oct 20
The Election Does Not Matter, Stick With Stock Winners Like Clean Energy - 11th Oct 20
Gold Stocks Are Cheap, But Not for Long - 11th Oct 20
Gold Miners Ready to Fall Further - 10th Oct 29
What Happens When the Stumble-Through Economy Stalls - 10th Oct 29
This Is What The Stock Market Is Saying About Trump’s Re-Election - 10th Oct 29
Here Is Everything You Must Know About Insolvency - 10th Oct 29
Sheffield Coronavirus Warning - UK Heading for Higher Covid-19 Infections than April Peak! - 10th Oct 29
Q2 Was Disastrous. But What’s Next for the US Economy – and Gold? - 9th Oct 20
Q4 Market Forecast: How to Invest in a World Awash in Debt - 9th Oct 20
A complete paradigm shift will make gold the generational trade - 9th Oct 20
Why You Should Look for Stocks Climbing Out of a “Big Base” - 9th Oct 20
UK Coronavirus Pandemic Wave 2 - Daily Covid-19 Positive Test Cases Forecast - 9th Oct 20
Ryzen ZEN 3: The Final Nail in Intel's Coffin! Cinebench Scores 5300x, 5600x, 5800x, 5900x 5950x - 9th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold GLD ETF Drawdown Continues Unabated

Commodities / Gold and Silver 2015 May 21, 2015 - 05:01 AM GMT

By: Dan_Norcini

Commodities

The giant gold ETF, GLD, reported yet another drawdown in its holdings this afternoon. This time around it was a 3 tons reduction bringing the total holdings to 715.26 tons. That is now up a mere 6.24 tons since the start of the year levels, a far cry from its peak in February of a 64 ton increase on the year.

There is no way to spin this to make it the least bit friendly for the cause of gold.


gold etfThe chart does not lie and as you can see, when the reported holdings of GLD were rising, the general trend in gold was higher. When the reported holdings are falling, the trend in the gold price is lower.

It really is that simple.

I find it nothing short of intellectual dishonesty for some in the gold perma-bull camp to try to make this fall in reported holdings as somehow bullish.

Then again, with that camp it is always the following:

“The sun is rising – bullish for gold”.

“The sun is setting – bullish for gold”.

“Inflation – bullish for gold”.

“Deflation – bullish for gold”.

“Full Moon – bullish for gold”.

“New Moon – bullish for gold “.

In other words, everything is bullish for gold, all the time!

Serious minded and objective traders and investors will rightly dismiss this foolish attitude but it is astonishing to me that so many gullible folks out there still pay attention to anything that some of these hucksters publish when it comes to gold.

The spin on this continued fall in reported holdings is that: “some big entities are sourcing gold from GLD and that is bullish”.

Let’s turn that “logic” ( I shudder to even use this word and attach it to this bizarre reasoning) around. Back up to the chart and look at the bottom in the holdings in November 2008. “Look! – reported holdings in GLD are rising higher and higher. That can only mean some large entities are using the buying in GLD to supply their gold into the market. That is clearly bearish.”

Now, how silly does that argument sound looking at the price soaring from below $700 all the way to $1900 as those reported holdings soared right along with the price!

Here is the simple truth – this ETF, is a vehicle that was created in order to allow large ( and small ) investors who wanted to own gold but whose charter did not allow them to buy gold futures. Also, it allowed those who preferred to avoid the risk of having to be specific stock pickers and choosing individual gold mining companies into which they could invest client money to get gold exposure.

Money managers and large funds and institutions welcome the liquidity in this ETF and as they can move into and out of it relatively quickly and easily.

That being said, it has become a very good gauge of Western-based investor sentiment towards gold in general. Falling reported holdings is simply evidence that the sentiment of this crowd towards gold is deteriorating.

My thinking on this is related to what has been happening in the global bond markets, but especially the US Treasury markets.

Bonds have been selling off in spite of fears of slowing global economic growth and in spite of a massive ECB QE program currently underway. I have commented on this development extensively of late.

Obviously something is at work here that as of yet is not completely clear. My own view is that there is a shift in sentiment occurring in regards to bonds among an increasing number of large entities. Whether through fears of a lack of liquidity from a grossly overcrowded trade, or through a growing consensus that the first rate hike by the Fed this year is inevitable, some are exiting bonds now while the going is good. “Why wait?”, is being asked more frequently when it comes to moving out of bonds.

Traders/investors in GLD are looking at this and are seeing an environment down the road which many believe will not be especially friendly towards gold. The reason is simple and it has to do with REAL interest rates.

Note – I am using the adjective, “REAL”, as opposed to NOMINAL interest rates.

It is no secret that the current rate of inflation is too low as far as Central Bankers are concerned. However, with bonds moving lower, interest rates, especially on the long end of the curve are rising. With a low rate of inflation and rising yields, REAL rates are currently positive.

Gold, in order to mount a sustained uptrend, requires NEGATIVE REAL RATES. Since traders are not seeing any signs of surging inflation at this point, there is no incentive to hold gold.

Please do not take me to task for the above statement. I am merely giving you the thinking behind those who are selling gold and moving out of GLD.

One thing which would work to short-circuit this thinking is if STAGFLATION were to take hold. I recently wrote a piece about that so please reference that if you need to refresh your memory.

http://traderdan.com/?p=4561

Such an environment would see NOMINAL interest rates rise as well but the rate of inflation would be outpacing the rise in rates resulting in NEGATIVE REAL rates. Gold would thrive in such an environment.

This is the reason that I keep coming back to the priority of the interest rate markets as being the KEY to all the rest of the markets.

Good trading to you all!

Dan Norcini

http://traderdan.com

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on the day's price action. His editorial contributions and supporting technical analysis charts cover a broad range of tradable entities including the precious metals and foreign exchange markets as well as the broader commodity world including the grain and livestock markets. He is a frequent contributor to both Reuters and Dow Jones as a market analyst for the livestock sector and can be on occasion be found as a source in the Wall Street Journal's commodities section. Trader Dan has also been a regular contributor in the past at Jim Sinclair's JS Mineset and King News World as well as may other Precious Metals oriented websites.

Copyright © 2015 Dan Norcini - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.

Dan Norcini Archive

© 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