Loading ...That being said, the bulk of the commodity complex is REELING this morning. Here is the latest Goldman Sachs Commodity Index chart. For any commodity ( and that includes both gold and silver) to escape the general downward tug being produced by money flows OUT of the overall sector, it is going to take some incredibly powerful fundamentals for that specific commodity.
Case in point is gold today; the weakness in the equity markets is producing some safe haven flows ( Bonds are higher and the Yen is stable). That is producing a bit of a bounce in gold but the blip higher is attracting sellers up near $1220 at the moment.
It should be noted that GLD, the giant gold ETF, reported a very sharp drop in gold holdings of nearly 8 tons this past Friday. Total holdings are not at the LOWEST LEVEL for this entire year, (down some 21.78 tons from the start of the year) and the lowest level in nearly SIX YEARS!
Here is a closer in view:
Here is a longer dated view:
One has to go way back to December 2008 to find a comparable level of reported gold holdings in the ETF. Just to remind the reader, that was the point that the markets began to respond to the very first Quantitative Easing round implemented by the Fed. Another way of saying this so that it perhaps serves to bring more force to the argument, is that nearly every single bit of gold purchased in GLD at the initial implementation of QE has been SOLD. That is astonishing! Those who keep talking about STRONG DEMAND for gold are simply incorrect, at least as far as the West is concerned. They have been selling their holdings and buying equities and look to continue doing that unless there is some sort of strong catalyst that changes the equation and thus the prevailing sentiment.
It just goes to illustrate how much gold has fallen out of favor as an alternative investment class by Western-based investors. That is the reason ANY FALTERING IN ASIAN-based DEMAND will be brutal for gold.
Based on the above-mentioned collapse in GLD holdings, AND the fact that the TIPS spread is also plummeting, there is simply no reason to buy gold at this time in the minds of Western-based investors.
Here is the latest on the TIPS spread and the comparison against the gold price. Notice that both lines are moving in unison. As inflation expectations fall, ( and I might mention as the Dollar moves higher ) the gold price is falling.