By Peter Brimelow
MarketWatch
Monday, August 6, 2012
NEW YORK -- Last week was a dud for gold. The radical gold bugs are divided, but regrouping.
The technical set-up had seemed extremely promising.
But gold fizzled even before it became clear that the Fed and the ECB
were not going to make reflationary, gold-stimulating moves. Measured
by the active December CME contract floor close, the metal lost 0.54% on
the week, while the NYSE Arca Gold Bugs Index was down 1.07%.
To be sure, this involved a considerable recovery from the alarming lows of mid-week.
But the damage done was still very severe. The thoughtful website The
Golden Truth published an essay on Friday titled "Chart Porn: Value
Play Of The Decade," featuring a chart from 1984 comparing the PHLX
Gold/Silver Index against gold. Gold shares have fallen to a new low:
2012 has been ghastly. From the peak in 1996, the ratio is down 70%.
The Golden Truth annotated its chart: "Are mining companies going out of business ... or absurdly cheap?":
http://truthingold.blogspot.com/2012/08/friday-chart-porn-value-play-of-...
There is unusual division among what I call the "Radical Gold Bugs"
as to what is happening. These are generally intellectual descendents of
Bill Murphys LeMetropoleCafe. All are strongly inclined to see
conspiratorial action by governments and their chosen instruments in
precious-metal moves. Needless to say, after the Crash of 2008 and
subsequent bailouts, this looks a less bizarre opinion than it once did.
Over at Trader Dan's Market Views, Dan Norcini offered a more
orthodox technical explanation in a thoughtful essay headed "Gold and
Silver Continue Marking Time."
Noting that he is "a firm believer in the view that the feds have a
vested interest in keeping the gold price under wraps," Norcini
nevertheless stressed the big decline in open interest (total contracts
outstanding) recently: "The gold and silver markets are currently moving
lower because the hot-money crowd has currently lost interest in them
and is putting its money to work in other markets for the time being as
they chase profits. Markets in sideways patterns do not make money for
hedge funds."
See article: http://www.traderdannorcini.blogspot.com/2012/08/gold-and-silver-continu...
Over at the LeMetropoleCafe mother ship, one correspondent expresses
sympathy for this technical explanation, but nevertheless still grumbled
in the old conspiratorial style that the awkward short positions noted
last week appear to have escaped suspiciously easily:
"This raises suspicions of accommodation being offered to exiting
specs, an event frequently seen in the Bad Old Days." (This refers to
the decade before the current rise in gold began in 2001, which radical
gold bugs believe was heavily manipulated to the benefit of insiders.)
And just to make things really creepy, LeMetropoleCafe has produced
anther correspondent, "James Mc," who on Thursday did very accurately
predict Friday's gold action, based on a concept of close price
management and permitted percentage gains.
But on a more gold-friendly note, LeMetropoleCafe also says that
there have been three dramatically positive news items from the physical
world.
On Wednesday the South Korean central bank announced a 16-tonne
purchase of gold in July, the third in what seems to be an acquisition
program for the country's still-small foreign-exchange reserves.
On Friday, Turkey reported July gold imports of 35 tonnes, the third
highest on record and 46% above June. (Ominously for Middle East peace
prospects, most of this is thought to be headed for Iran.)
And on Sunday evening, Hong Kong reported June was another month of startlingly heavy net shipments of gold to China.
Maybe it is too soon to write August off.
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