Seems to be some sort of momentum thing going on here…
I should be pissed, but this is actually really exciting for me. I haven’t bought the physical for a long time and just this week I started picking up a few coins and bars on ebay and apmex. I would love to see gold get down to $1,200 and silver down to $20-22. I’m going to build a fort in my basement made entirely out of PMs.
Of course, this still sucks for my paper portfolio, which as of this morning was about 35% in gold/silver/silver miners. Now it’s probably closer to 30%. Normally I say nothing has changed as far as my investment thesis goes, but recently there has been some interesting supply/demand news. GLD has “lost” about 25 tonnes of their “gold inventory” over the last few weeks. People are fleeing GLD, and to a much lesser extent SLV. However, demand for the phyical metals are near all-time highs, particularly for silver. Short-term GLD selling definitely hurts, but shaking out some of the paper holders will ultimately be good for the market.
Gold’s holding at $1,500. If it breaks it will probably test $1,400. If that breaks we’ll probably see $1,200. If we reach $1,200 I’ll move 80% of my portfolio to gold. I always like silver below $27 and would buy more now if I had more dry powder. But it could test $24, then $22. Below $22 and your getting below the mariginal cost of production so it’s a no-brainer. If it does happen to go below $22 we could very well see $18. If that happens, I’ll go all in.
Still nothing wrong with buying here if you’re holding for a few years. But until the outflows from GLD reverse we’ll see some pressure.
Edit: Excitement and grammar don’t mix
Anyone have a hypothesis for why gold is down so much and equity markets not so much (in fact up yesterday)?
I would usually expect the announcement to be either “Pro QE” or “Against QE” with equity markets and gold moving the same direction. Oil is also down a few percentage points.
The internals are really weak and have been all day. JPM missed top line, etc. Not enough momentum to get this market positive today I think. It should end down large double digits if not triple. (the Dow that is)
In general, people are fleeing the “safe haven” to put money into equity, or sovereign debt which is perceived as less risky than a few years ago. Also, the Fed rhetoric about QE scale back makes people think rates will rise, making gold less attractive as a store of value. Of course, if Sweep is right and the world economy collapses, then these effects will probably reverse. Not sure what is behind today’s big moves though…
Like anything else it comes down to supply and demand. It’s a little trickier with gold since you have to account for difference between the demand for paper gold and physical gold. YTD we’ve seen retail investors, and to some extent, hedge funds dumping GLD (paper gold). On the other hand, physical gold is getting gobbled up by the Chinese (both gov’t and citizens), Indians, and Central Banks everywhere.
To wit, in the last two days 19 TONNES of gold evaporated from the GLD vaults. And, the ECB is forcing Cyprus to sell their almost 14 tonnes of gold to raise funds (anyone still think gold isn’t viewed as money by banks?). So, there’s been a lot of supply hitting the market recently. But, China et al. are happy to buy gold at $1,500.
Maybe we’ll see continued earnings weakness. Alcoa missed top line and its like nobody batted an eye.
I wrote a commentary for a client where I noted that the drop in gold prices in Q1 and in the past 12 months is basically the mirror image of the strengthening dollar. Obviously, if you are a dollar based investor, it’s best not to have to endure the loss, when you could have been holding greenbacks instead, and it looks even worse next to the 10%+ stock market return, but it still doesn’t look like panic rush out of stuff.
A 4% or 5% drop in one day seems a bit surprising. The usual trigger for something like this is some major holder selling a bunch… the main candidate is Cyprus’ central bank.
With the US now entering fiscal austerity regime, it seems unlikely that employment or inflation is going to trigger an end to QE soon, so it looks more like a buying opportunity to me, although the upside doesn’t seem as big as it used to be.
Several of my internal and external clients were buying SLV and GLD puts yesterday. I do not recall taking any orders to buy calls. I love high volume days at the Trade Desk.