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Gold Slumps

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Post by Horizon Tue Aug 06, 2013 11:50 am

Gold Slumps as Economic Optimism Dents Demand
Published August 06, 2013
Reuters
Gold fell around 1% on Tuesday as data indicating economic growth on both sides of the Atlantic dented its appeal as a safe haven, while a steady dollar also weighed prices down.
The figures showed that growth in the U.S. services sector rebounded from a three-year low, while British businesses boomed and activity at euro zone companies expanded, albeit modestly, in July for the first time in 18 months.
Spot gold fell as much as 1.2 percent to $1,287.44 an ounce early in the day and was down 1.1 percent at $1,289.16 by 1152 GMT.
U.S. gold futures for December fell $13.90 to $1,288.50 an ounce.
Losses were exacerbated by technical selling as automatic sale orders were placed by traders below the $1,300 an ounce mark to limit losses, traders said.
"We fell through the psychological support level of $1,300 last night, and it does feel as the prevailing dollar strength is curtailing gold momentum," bullion dealer Sharps Pixley CEO Ross Norman said.
"It is hard to read too much into moves during the summer months as the market can fluctuate widely on very small trades ... I suspect we can see some more downside from here in the short term."
The dollar was steady against a basket of currencies, and European shares nudged higher after data showed a faster-than-expected recovery in the UK and German economies.
Benchmark U.S. Treasury yields rose to around 2.65 percent, below July's two-year peak of 2.755 percent but still higher than at the start of the year. The returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
Gold has lost around 25 percent of its value this year on fears the U.S. Federal Reserve will curb its monetary stimulus on signs of economic recovery.
Dallas Fed President Richard Fisher reiterated on Monday that the stimulus tapering is likely to start sooner rather than later.
"Since (Fisher) has been one of the most vocal critics of the bond purchasing programme, this is to be taken with a pinch of salt," Marex Spectron said in a note. "However it certainly didn't help the cause of the precious metals."
PHYSICAL DEMAND SLOW
Gold importers in top bullion consumer India remained on the sidelines for a third straight week due to policy uncertainty on shipments, and premiums eased.
Gold prices on the Shanghai Gold Exchange fell 1.4 percent on Tuesday on lower demand, dealers said.
Premiums to London spot prices in Hong Kong - a major supplier to China - have fallen to around $3-$4 an ounce from $5 two weeks ago.
As a gauge of investor sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.2 percent to 917.14 tonnes on Monday.
Gold outflows from exchange-traded products (ETPs) reached $2.6 billion in July, bringing total redemptions for the year at $30.9 billion, according to the latest data from money manager BlackRock.
Silver was down 0.1 percent to $19.68 an ounce. Platinum fell 0.9 percent to $1,434.24 an ounce and palladium lost 0.7 percent to $726 an ounce


Read more: http://www.foxbusiness.com/investing/2013/08/06/gold-slumps-as-economic-optimism-dents-demand/#ixzz2bCkW0uFc

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Post by Kevind53 Tue Aug 06, 2013 12:36 pm

Many feel that gold will continue to crater until it bottoms out somewhere around $1000. I don't kow, but my "gut" tells me to steer clear of gold and silver for the time being.

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Post by andy1979uk Tue Aug 06, 2013 1:24 pm

The cot report last week was pretty neutral... It s in a decending triangle formation... ( Looking at the daily charts) Approaching the pinnacle.. It will break one way or the other... But it will bounce first... Before it comes back and tests this level again... Plus it smashed through so much support when it dropped eventually they always get re tested... Long term it doesn't matter ever imagine a central banker allowing deflation? When gold drops its a buying opportunity.. Buy the dips... If it drops further buy some more...
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Post by Kevind53 Tue Aug 06, 2013 1:27 pm

Yea, except my instincts say it's going to pull a market of '08 move ... and I my "gut" is right, things are gonna get real ugly real fast.

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Post by andy1979uk Tue Aug 06, 2013 1:52 pm

Hopefully... I ll be buying more...
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Post by andy1979uk Thu Aug 08, 2013 6:25 pm

Peter Schiff's Case for Gold

Get Ready for a Spike

By Joseph Cafariello

Thursday, August 8th, 2013

How in the world could gold be so cheap amidst all that is going on in the world? Almost every developed nation is lowering interest rates to weaken its currency and then printing more money, which weakens it even further. Shouldn’t gold be well over $2,000 by now? What is holding it down?
According to Peter Schiff of Euro Pacific Capital, a better question to ask would be: Who is holding it down? Schiff believes the big banks, along with some U.S. Federal Reserve banks, are involved.

Just what is it that has raised Schiff’s long-running suspicions? If he is right that gold has been artificially kept down, might it some day also be manipulated back up? The banks pulling the strings would certainly benefit from a rapid spike back up. And so can you.
Schiff’s Three Signals

Three signals have raised Schiff’s expectations for a sharp gold price spike, as he outlined in a recent CNBC interview:
Weaker economic recovery: According to the latest U.S. GDP data, the American economy in Q2 grew at an annualized rate of 1.7%. However, Schiff contends that this figure is based on 0.7% inflation, when the government’s own inflation reading came in at 1.1%. If inflation is truly greater than the GDP calculations have been allowing, then GDP cannot be as high as has been reported. Schiff asserts GDP is barely in the positive, perhaps even stagnant at 0% growth.

More stimulus required: If the economic recovery truly is that weak, Schiff believes there is no way the Federal Reserve will curtail stimulus. In fact, he argues the Fed has no choice but to increase stimulus, which the Fed has been indicating in its press releases that it reserves the right to do if incoming data warrant it.

Inflation will take its toll: Combining a weak economy (which Schiff expects to recede into another recession) with continued easy-money stimulus can have no other effect than to unleash inflation to run amok. The Federal Reserve has also stated in its releases that it wants to coax a higher inflation rate of at least 2%. Inflation is part of its agenda, and it will not stop stimulus until it arrives.

Once these three symptoms of a diseased economy become full blown, the flight to the safety of gold will resume. Even as Marcus Grubb, managing director of investment at the World Gold Council, indicated in a CNBC interview, “This is a correction in a trend, rather than the end of that trend.”
Inventory Misrepresentation

Schiff is also astounded by the stark disparity between physical gold purchases and paper gold sales. More physical has been purchased than paper sales have made available.

When paper gold – shares of gold ETFs, for example – is sold, the trust fund is supposed to release a corresponding amount of physical gold into the marketplace. Why would they want to hold more than their clients have purchased?

But the two volumes do not add up. Grubb indicated to CNBC that so far this year, paper gold sales from ETFs have reached some 650 tons, while demand for physical gold in China and India is estimated to reach 1,000 tons and 850 tons respectively by the end of the year. Meanwhile, central bank purchases by Russia, Turkey, Greece, and numerous others are estimated to reach 550 tons for 2013.

Assuming two-thirds of those purchases have been completed so far would pit 1,600 tons of physical purchases against just 650 tons of paper sales. That’s a ratio of nearly 2.5:1. So why has the gold price fallen so dramatically when purchases have outpaced sales by so wide a margin?

Even more importantly, from what source have these physical purchases been supplied? Stockpiles have not changed that dramatically, and new supply has been curtailed due to scaled-back mining operations as metals prices have fallen below operating costs.

Schiff believes not all of these purchases have been fully supplied and never will be – because there simply is not enough gold available to go around. Schiff believes the large banks have been lending and selling more gold than they have in their inventories.

Not all physical gold that is purchased is actually delivered but will often be stored in bank vaults for safe-keeping. So while ownership of physical gold is transferred from the banks to the buyers, in many cases the actual gold is never moved. There is nothing to stop a bank from selling the same bar of gold to more than one buyer with the arrangement of storing it for them for an added fee.
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Schiff wants to see an actual inventory count to make sure banks haven’t been selling the same gold twice. Does anyone really know how much gold is still in America’s Fort Knox? Not since the last complete audit in 1953. Since then, there have been partial inspections of its gold, but no full-scale inventory audit.

As of January, Germany has begun a process of repatriating 300 tons of gold held at the Federal Reserve Bank of New York. Although this is only 5% of the bank’s gold holdings, the process of delivering Germany its gold is expected to take until 2020 – a full 7 years.

Why so long? Could it be that the bank is now scrambling to accumulate 300 tons of gold currently worth nearly $12.5 billion? Could this be the reason why the gold price has fallen so sharply lately – to make it cheaper for banks to get their hands on it? First they over-sold gold above $1800, now they’re buying it back for $1300 and then delivering it to other central banks. Possible? Schiff doesn’t put it past them.

Proper Allocation

Cheap prices have forced mine closures, restricting supply. At some point, when the selling finally stops and people start buying again, Schiff expects the gold price to shoot up dramatically, since there isn’t as much physical gold out there as people think, and new production has been curtailed by mines operating at greatly reduced capacity. It takes a long time – several months or quarters even – for producers to replenish stockpiles, especially if they have to reopen closed mines.

No one knows when the price spike will come exactly. So sticking to that universally accepted allocation of between 5% and 15% in precious metals is wise. By rebalancing your portfolio every couple of weeks or so to restore your desired percentage allocation, you would be buying a little on the dips and selling a little at the peaks.

In so doing, not only would you profit through the choppy volatility, but you would also be able to participate in gold’s correction to the upside whenever it happens. You can’t go wrong with that.

Joseph Cafariello
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