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Gold Bubble? “More People That Own Apple Stock Than Gold”

GoldCore's picture




 

Gold is down 1.6% on the week. The gold market has seen peculiar, lack lustre, low volume trading this week punctuated with sudden, oddly timed, very large sell orders. This leads to quick price falls followed either by slow, gradual recovery or a sharp bounce, prior to next bout of strangely timed sudden large sell orders.  

This was clearly seen by the mysterious and massive $1.24 billion ‘Goldfinger’ trade on Monday. 

While the $1.24 billion trade on Monday was attributed to a “fat finger” or algo trading in the gold market, there was a similar spike in volume at exactly the same time in silver – while all other markets saw little price movements.

There have been a few instances of this and it was seen yesterday again around 1330 GMT when there was a large 3,000 plus lot gold sell order which saw the price quickly fall by over $5 before a rapid recovery. Volume that size is unusual for that time of the day on the COMEX.

Yesterday the silver pits again suddenly saw the sale of some 200,000 lots in a minute or two that knocked the most-active SI future back a few cents (see chart below) and this led to silver breaching the $30/oz mark later in the session.

It is unusual to see a market building momentum in a certain direction and then to see massive sell orders in both the gold and silver market which then lead to further tech selling which can feed on itself. 

At the same time there appear to be eager buyers at these levels who continue to accumulate on the dips. Ultimately prices will be dictated not by strange and potentially manipulative trading on the COMEX but by the global supply and demand of physical bullion.


Silver Price and Volume – May 3rd (Thomson Reuters)

Gold’s weakness may also be due to short correlations with equity markets – which have come off due to investor jitters after recent poor data and ahead of the US payrolls report.

Market expectations for Friday's non-farm payrolls report have fallen this week, with dealers now expecting that the economy added 125,000 to 150,000 jobs in April, below the previous Reuters consensus forecast of 170,000. Investors are expecting more lacklustre job growth last month following a trail of weak U.S. indicators.

A poor jobs number should lead to gold moving higher as it will lead to concerns about the US economy and concerns that QE3 will be launched leading to the further debasement of the dollar. 

The European Central Bank kept rates steady at 1% as expected by market watchers.  The euro faces additional risks on Sunday from elections in France and Greece which could create further disruption in the Eurozone about their countries commitment to fiscal austerity.

Euro gold is consolidating between €1,150/oz and €1,400/oz (see chart below). Given the terrible economic mess that Europe finds itself in, it seems only a matter of time before gold reaches €1,400/oz again and there is of course the risk of the euro falling by much more against gold. 

Gold a Bubble? “More People That Own Apple Stock Than Gold” 
Respected investment fund manager and author of the 'Gloom, Boom & Doom Report' has advised buying gold again and says that 25% of a portfolio should be in precious metals. 

He says another move to the downside of gold is possible, but worldwide printing of money assures long term support.

Swiss born and educated Marc Faber’s contrarian voice is common on CNBC and Bloomberg TV when it comes to big-picture macro forecasting and an astute historical perspective. However, outside of the specialist financial media his astute historical perspective remains relatively unknown. 

Interviewed at his residence in Hong Kong by Hard Asset Investor, Faber made the excellent point that the majority of the investment public continues not to own gold. Especially, when compared to say one popular tech stock - such as Apple. 


XAU/EUR Currency Chart – (Bloomberg)

Faber said that he attends lots of conferences and usually asks the audience, “How many of you own gold?” Normally, hardly anyone owns it. I’ve been to conferences with thousands of people attending, and nobody owned any physical gold.”

Faber believes that this shows that gold is not a bubble. 

“When you went to an investment conference in 1989, everybody owned Japanese stocks. And in 2000, everybody owned tech stocks. That is the bubble, when the majority of market participants own an asset. I think there are more people that own Apple stock than gold.”

Faber points out that while the price of gold has risen by quite a lot in the last 13 years (from $252/oz in 1999), the debt situation of the western world has deteriorated dramatically.

“People say the price of gold is in a bubble stage and it is up substantially from the lows in 1999, which was, at the time, around $252 per ounce. But at the same time, we had an explosion of debt, not just government debt, but private sector debt, and an explosion of unfunded liabilities such as in the pension fund industry, and not just with Medicare, Social Security and Medicaid.”

“So now, 12 years after the gold’s low, we are essentially in a situation where maybe the price of gold should be much higher because the economic and financial conditions are worse than they were 12 years ago.”

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Sat, 05/05/2012 - 00:25 | 2398929 penisouraus erecti
penisouraus erecti's picture

Guess who's buying all those iPods......

http://www.wthr.com/video?clipId=7054149&topVideoCatNo=103348&autoStart=true

 

Sat, 05/05/2012 - 00:04 | 2398915 robertocarlos
robertocarlos's picture

Yes but iMagine if APPL splits. To the moon. 

Fri, 05/04/2012 - 21:21 | 2398734 GCT
GCT's picture

There is a big difference in my mind.  Gold or silver may drop in value but I still have something besides paper in my hands.  I take a physical asset over paper anytime. 

Fri, 05/04/2012 - 20:58 | 2398699 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

is there no gold ipod?

Fri, 05/04/2012 - 20:20 | 2398634 Moe Howard
Moe Howard's picture

Can't speak for anyone else but I have been taking advantage of the recent sales in certain physical metals.

Fri, 05/04/2012 - 21:02 | 2398706 Dr. Sandi
Dr. Sandi's picture

Hopefully not lithium!

 

------

 

Ow, ow, ow, ow!

Fri, 05/04/2012 - 19:00 | 2398499 Bag Of Meat
Bag Of Meat's picture

So how do I buy physical gold again?..

Fri, 05/04/2012 - 18:33 | 2398467 Peter Pan
Peter Pan's picture

Gold is not for everyone because few people have the patience, the insight and the historical appreciation to make a ommitment in gold. Then again only around 5% of people really succeed in life or escape financial oblivion in a depression.

As things stand at the moment, the vast majority of people do not have much loose change to buy gold with .

Finally, the gold producers i think would greatly enhance gold sales by producing and promoting a 1/10 of an ounce gold coin.

Fri, 05/04/2012 - 18:42 | 2398479 akak
akak's picture

 

Gold is not for everyone because few people have the patience, the insight and the historical appreciation to make a commitment in gold.

That is an extremely salient point, that most people today lack the historical appreciation to understand why holding gold is of such value at this financial and monetary juncture.  Americans are particularly ignorant of and contemptuous of history, to their own detriment. 

I similarly see the wild and ludicrous ravings of all the deflationists in a similar vein --- all they can fall back on is their ivory-tower academic theories, when monetary history is beyond dispute on the inevitable fiat debasement outcome of the situation (exponentially rising governmental spending and debt) that we face today, and which so many other societies and nations have faced in the past as well, always with the same or similar outcomes.

Fri, 05/04/2012 - 20:09 | 2398612 WhiteNight123129
WhiteNight123129's picture

And what is the proportion who understand that a precious metal can only be reliably measured through another precious metal? Not many people actually understand that the Gold standard by demonetizing Silver created artificial deflation in the West from 1873 to 1896 since Silver removal contracted monetary base, while it created inflation in Asia which was still operating on a Silver standard and receiving Silver influx from the West. Silver supplies were actually more stable and increasing slower between 1803 to 1848 and after than Gold. Just because the UN would end does not mean we come back to the Society of Nations. If the current system fails and we have chaos,  that does not mean we come back to an agreed upon Gold Standard. In chaoe situation, actually for small purchases Silver would be the choice, Gold is your 1,000 USD bill, Silver your smaller bank notes. Silver is the way to measure Gold, paper can not measure it very reliably over the long run.

 

Sat, 05/05/2012 - 02:12 | 2398986 Bohm Squad
Bohm Squad's picture

re: Silver is the way to measure gold.

Yes, Yes, Yes.  

It will be interesting to see if silver:gold ratio ever returns to its historical average...real interesting.  I believe it will...eventually.

Fri, 05/04/2012 - 18:18 | 2398439 Diamond Jim
Diamond Jim's picture

With EU break up better than a 50-50 due to socialists taking over France this weekend, and Greek elections with an outcome you can be sure the Greeks will tell the EU to stick it when the money faucet gets closed off...look for a strong dollar (strongest of generally weak currencies) for the next few weeks. I expect gold to drop to $1520 or so, the Bernancke in the midst of market chaos announces some magical elixir to save everyone's butt. Gold then resumes the upward advance, dollar craps out on QE 3, commodities up, market up for a while until the next crisis in the fall.

Fri, 05/04/2012 - 17:01 | 2398266 Walt D.
Walt D.'s picture

Gold Bubble? Heven't you heard? The Ben Bernank is looking for NASA to make a machine that can create gold out of thin air. Then he intends to flood the market with cheap gold.

Fri, 05/04/2012 - 17:40 | 2398349 akak
akak's picture

NASA?!

If NASA ever did make a gold-producing machine, you can be sure that it would take at least 10 years, and end up making gold at $500,000 per ounce.  I wouldn't exactly worry about this scenario.

Fri, 05/04/2012 - 22:19 | 2398805 Mary Wilbur
Mary Wilbur's picture

Alchemists, during the European Middle Ages, tried to make gold out of base metal and failed. don't think NASA employs people to dabble in alchemy.

Fri, 05/04/2012 - 22:28 | 2398816 akak
akak's picture

 

don't think NASA employs people to dabble in alchemy.

The fact that the chemical transmutation of elements would violate most of the known laws of physics might just have something to do with that.

Sat, 05/05/2012 - 01:43 | 2398974 RafterManFMJ
RafterManFMJ's picture

I think NASA's new mission is to put a Muslim on the moon. Or make Muslims more aware of how much America loves them as we bomb them into orbit.

Fri, 05/04/2012 - 16:33 | 2398167 Doubting Thomass
Doubting Thomass's picture

Nice inverse head shoulder pattern forming in both Gold and Silver. Will be interesting to see if it takes the last leg up required to plant it firmly in place.

Fri, 05/04/2012 - 16:30 | 2398143 shovelhead
shovelhead's picture

"prior to next bout of strangely timed sudden large sell orders."

"Ultimately prices will be dictated not by strange and potentially manipulative trading on the COMEX."

Potentially?

Did this guy just wake up from a very,very long nap?

Yeah, I got your fat finger right here. See it?

 

Fri, 05/04/2012 - 16:23 | 2398101 ebworthen
ebworthen's picture

Funny, but I've listened to Marc Faber enough that when I read text I hear his voice and peculiar accent when reading it.

Dow/Gold ratio also instructive, along with the value of a dollar versus an ounce of gold past 100 years.

No mistake that the creation of the FED was the beginning of the long slide in the value of a dollar.

Fri, 05/04/2012 - 22:26 | 2398813 Mary Wilbur
Mary Wilbur's picture

Read James Rickards' book "Currency Wars" to get an excellent history of the role gold played in our currency history from 1870 to 1914 and its projected role in the future.

Fri, 05/04/2012 - 16:10 | 2398032 Bastiat009
Bastiat009's picture

Let's assume the market is rigged. Now tell me why that would change.

Sat, 05/05/2012 - 02:21 | 2398987 Bohm Squad
Bohm Squad's picture

Because manipulations cannot last forever - market forces will eventually prevail.  It's nature.  Frederic Bastiat's theory of exchange could also be expanded to answer your question.

Fri, 05/04/2012 - 15:55 | 2397982 Doubleguns
Doubleguns's picture

BTFD in PM's!!!!

Fri, 05/04/2012 - 15:36 | 2397889 Bansters-in-my-...
Bansters-in-my- feces's picture

“More People That Own Apple Stock Than Gold"

Wow...nice sentence structure....for a headline.

Sat, 05/05/2012 - 01:41 | 2398972 RafterManFMJ
RafterManFMJ's picture

LOL I had to go back and re-read it; you are right. I'm so used to fucked up grammar and poor spelling that my mind autmatically corrects for it.  

Fri, 05/04/2012 - 13:43 | 2397526 Fake Jim Quinn
Fake Jim Quinn's picture

There is a bubble of gold blogs/articles discussung gold bubbles

Fri, 05/04/2012 - 15:58 | 2397987 Comay Mierda
Comay Mierda's picture

thats how you know its not a bubble.  if they all were saying gold is going to 5000 per ounce, then its a bubble.

another sign - all the homeless people on the side of the road are holding "WE BUY GOLD" signs, not "WE SELL GOLD"

Fri, 05/04/2012 - 16:28 | 2398138 ebworthen
ebworthen's picture

Local jeweler known for diamonds had special "bring in your gold" event recently.

"Top dollar paid", "Use as a deposit on an engagement ring", etc.

Fri, 05/04/2012 - 16:45 | 2398210 Al Huxley
Al Huxley's picture

I was told by one of those 'cash for gold' stands in the mall that I should sell my 'old, unused gold' because that was better for the environment than mining it.

Fri, 05/04/2012 - 20:52 | 2398685 SAT 800
SAT 800's picture

"Old, unused Gold"---LOL ! That's a funny one, alright. you mean that old dusty stuff  that's just sitting around in the garage? Sure, why not.

Fri, 05/04/2012 - 13:38 | 2397498 lakecity55
lakecity55's picture

Go with Silver. World demand is growing beyond supply. The paper will end with phys left standing.

Keep Stackin'!

Fri, 05/04/2012 - 13:41 | 2397516 lakecity55
lakecity55's picture

Barry X will soon have political prisoners cleaning that up, don't worry!

Fri, 05/04/2012 - 12:49 | 2397325 Hulk
Hulk's picture

Market tanking today, Gold, Silver up. I expect to see more of this behaviour from here on out.

We have  run out of road...

Expect Au, Ag, to pop big soon. Holding  a basketball 25 feet below the water surface takes a

tremendous amount of force, and when that force becomes exhausted, look the fuck out...

Fri, 05/04/2012 - 14:14 | 2397618 _underscore
_underscore's picture

Good analogy. I notice the knock-downs (usually 10:30 EST) & the 'basketball' springs right back up, most days.

I've noticed a few jitters, vis-a-vis PM prices, on various postings/blogs/sites  of late - I can only say as a longish time stock investor who's seen my fair share of bubbles, losses, counter-party malpractice & so on, these fluctuations in PM prices hardly bother me at all - just sorry I haven't got excess fiat currently, to do anything about it. There's a danger, I think, that one can regard PMs just like another 'stock' - it took me a while to get over that misapprehension, but I realised - and you must repeat this to yourself: you have it in your hands, no a$$hole can make cute deals to take it away (like stocks, securities & fiat of various kinds), it just sits there, serenly like a meditating guru, watching all the to & fro of market froth & govts. scurrying around trying to keep their trousers up & the people sedated. I'm not even particularly bothered about the payback timeframe - there are just too many reactionary forces & manipulators at work to make any sensible predictions, but the fundamentals that I see/hear/touch everyday around me all scream the same message with as much unambiguity & Munch's masterpiece.

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