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Fear In Gold Market As Hedge Funds And Retail Sell – HNW And Smart Money Accumulate Again

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More speculative gold buyers appear to have been spooked by the FOMC minutes from the Fed’s January 30th meeting which “said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases amid a debate over the risks and benefits of further quantitative easing.” 

Gold rebounded this morning from a 7 month low as physical buyers in Asia bought the dip and it is likely that central banks are also accumulating after this sharp correction.

The RSI or relative strength index is near 20 which suggests that spot gold is deeply oversold and strong support is seen at the $1,500/oz level  (see chart below).

Other indices like the S&P 500 index has climbed 6% year to date while gold has fallen 6% during the same period. The largest ETF, SPDR Gold Trust, has fell 1.57% from the prior session to 1,299.164 tonnes on Feb 20th, its lowest in over five months. 


Gold in USD, 50, 100, 200 Day Moving Average and Support – (Bloomberg)

Gold has come under pressure from heavy liquidation by hedge funds and banks on the COMEX this week. The unusual and often 'not for profit' nature of the selling, at the same time every day this week, has again led to suspicions of market manipulation.

Short sellers, technical and momentum traders have the upper hand and are pressing their advantage with momentum and sentiment on their side. Nervous longs are being stopped out through stop loss orders and concerns regarding the clear downward short term trend. 

Gold market sentiment is the most negative that we have seen in recent years. The ratio of sell orders to buy orders was the highest it has ever been in recent days. Yesterday, for the first time ever we had all sell orders for gold and silver coins, bars and certificates and not one buy order.

This shows that many retail buyers are very nervous about the outlook for gold and concerned about the risk of further price falls.

There has been more selling from retail clients today and we are getting a sense of fear from clients that they have not had in the last ten years. Interestingly, long term buyers of gold and silver bullion, particularly high net worth individuals were evident this morning and flows from this demographic look set to continue.

Fear in the gold market and retail buyers selling their gold suggest that we are very likely to close to a bottom.

Still it is important to always remember the old Wall Street adage to "never catch a falling knife."

More risk averse buyers would be prudent to hold off buying the dip until we get a higher weekly or even monthly close. Alternatively, they should consider dollar, pound or euro cost averaging into a position at these levels.

Gold’s ‘plunge’ is now headline news which is bullish from a contrarian perspective. As is the fact that many of the same people who have been claiming gold is a bubble since it was $1,000/oz have again been covering gold after periods of silence.


Silver in USD, 50, 100, 200 Day Moving Average and Support – (Bloomberg)

Gold’s so called ‘death cross’ scare is simplistic, bogus nonsense that should be ignored by all. Gold experienced a ‘death cross’ in April 2012 (see gold chart above) and similar alarmist analysis was put forward about the death of the gold bull market and the likelihood of a 1980 style plunge. 

This did not come to pass, nor will it come to pass now given the real world fundamentals driving the gold market. 

Single technical indicators in and of themselves are completely useless. It is far more important to focus on the real fundamentals of a European and coming UK, U.S. and Japanese debt crises’, global currency wars and the real risk of recessions and a Depression.

It is far more important to focus on the hard facts and the hard data on money supply growth rather than mere words of central bankers. Currencies globally continue to be debased.

Less informed money is again selling gold or proclaiming the end of gold’s bull market. The smart money such as Marc Faber, Jim Rogers and those who predicted this crisis and have constantly advocated a long term allocation to gold bullion to hedge systemic and monetary risk, will accumulate again on this dip.

NEWS  
Gold rebounds after Fed worries sink price to 7-month low - Reuters

Gold sinks below $1,600 amid ‘death cross’ talk – Market Watch

Gold dives to lowest since July on Fed, hedge fund talk - Reuters

Collector Coins Ignore Weakness in Bullion – Numis Master

COMMENTARY
Gold futures setup becoming bullish – Got Gold Report

SAC Capital Partners Bets A Quarter Billion On Gold, Silver, & Mining Shares – Bull Market Thinking

Obama's State of the Union Address – Totally Wrong on Energy – Casey Research

In The Strange Case Of Gold's Regular Morning Mugging – Zero Hedge

For breaking news and commentary on financial markets and gold, follow us on Twitter.

 

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Thu, 02/21/2013 - 17:25 | 3264830 pocatello
pocatello's picture

http://www.fofoa.blogspot.com/

 

Gold.  

 

Peace out.

Thu, 02/21/2013 - 16:12 | 3264492 Hongcha
Hongcha's picture

I think it's a DCB and that they are eventually gonna run the stops at $1,500/oz.  Those stops are just too tasty to resist.  It will be like a jackboot in the face and if they really want to dissuade as many people from holding gold as possible, that would be the way to do it.

In cash.

Thu, 02/21/2013 - 15:35 | 3264320 Bansters-in-my-...
Bansters-in-my- feces's picture

"The unusual and often 'not for profit' nature of the selling, at the same time every day this week, has again led to suspicions of market manipulation."

This shit sounds like it comes from someone very afraid of the......

Authoritys with that new NDAA law and all.

Thu, 02/21/2013 - 15:25 | 3264280 jharry
jharry's picture

Like it's not a big deal.  With gold and silver you know what you've got.  With everything else, it's a big guessing game, even with expert info. 

So buy gold, silver, oil (Jim Daughty "The Great Mogambo") and kick back.  "Life's short", says Fred the midget.

Thu, 02/21/2013 - 15:24 | 3264272 shovelhead
shovelhead's picture

Yawn.

Let me know when China and Russia start selling.

Thu, 02/21/2013 - 15:23 | 3264271 KnightTakesKing
KnightTakesKing's picture

Sold all of my paper gold postions yesterday and bought physical Au today. I feel a whole bunch better about being out of paper altogether. Can't wait for delivery!

I'm (or will be) split about 60/40 Silver/Gold. And about 25% of portfolio in physical. Is that a reasonable balance?

Thu, 02/21/2013 - 16:40 | 3264669 thewayitis
thewayitis's picture

 I hear you .....Bought a 100 oz englehart silver bar today for 3010. Thanks for the CHEAP guys. Cheapest one on Ebay is like 3400. Yikes

Thu, 02/21/2013 - 16:11 | 3264516 Divine Wind
Divine Wind's picture

 

 

Only keep as much in paper as you can afford to lose.

If you are still in anything involving counter-party risk, you are picking up coins in front of a bulldozer.

If you see the need for 40% gold, and you KNOW there is a shitstorm about to break on everything else, get out and sleep better at night.

The last place you want to be is on hold, waiting to submit a sell order when everyone else is doing the same thing.

Panic early and avoid the rush.

So the fuck what if you miss a few bucks while equities are carried up a few more steps.

Greed will get your ass handed to you in this situation.

Get out. It is not worth it.

 

Mon, 02/25/2013 - 13:07 | 3274258 lynnybee
lynnybee's picture

'Panic early and avoid the rush.' ... he who panics first panics best.   

Thu, 02/21/2013 - 15:10 | 3264219 DowTheorist
DowTheorist's picture

The death cross isn't a reliable indicator. Ritholtz, of the "Big Picture" made this clear some time ago:

http://www.ritholtz.com/blog/2011/08/worry-about-important-things-not-th...

The Dow theory is a much more responsive means to spot changes in trend in a timely manner. Thus, the primar bear market of (paper) gold was signaled on December 20, 2012, well before the "death cross" did:

 

http://www.dowtheoryinvestment.com/2012/12/dow-theory-update-for-dec-20-...

 

Thu, 02/21/2013 - 14:46 | 3264147 Imminent Crucible
Imminent Crucible's picture

"similar alarmist analysis was put forward about the death of the gold bull market and the likelihood of a 1980 style plunge"

What's the likelihood of a 1980-style plunge? Very likely--if Bernanke does what Volcker did: He raised the funds rate 1000 basis points in five months. Volcker drove the prime rate above 21% by 1981.  Of course, federal, municipal, corporate and consumer debt were a tiny fraction back then of what they are today.

Raising the long bond yield to 13% might have a deleterious effect on the mortgage markets. What, the mortgage markets are already dead?

Soaring Treasury yields would bankrupt the nation and topple the govt.?  Well okay then, let 'er rip.

Thu, 02/21/2013 - 14:39 | 3264127 MFLTucson
MFLTucson's picture

Short sellers, technical and momentum traders have the upper hand and are pressing their advantage with momentum and sentiment on their side. Nervous longs are being stopped out through stop loss orders and concerns regarding the clear downward short term trend. 

 

Jamie Dimon, and HSBC and their band of criminals just having a little fun on your dime.  Disgusting motherfuckers but, trust that their day will come as with all hogs.

Thu, 02/21/2013 - 14:34 | 3264109 NRGIsFree
NRGIsFree's picture

Bought yesterday. The most since 2005. Did I catch bottom? Don't care, fundamentals are fundamentals. The noise coming from lamestream indicates we hit bottom or are close. The people, and countries buying are not going to sell. They are the smart ones who understand the big picture. At this point the weak hands are nothing more than small time spontaneous players who are confused by the lamestream noise and manipulation. Hold.. Hold.. Hold..

Thu, 02/21/2013 - 13:44 | 3263915 Mi Naem
Mi Naem's picture

Schiff has good comments at

http://www.youtube.com/watch?v=ZaVCKsIJlmE

 

“People who are saying there is no reason to buy gold now, never understood the reason people were buying it in the first place. People weren’t buying gold because they were worried about a crisis in the Eurozone or weak US stocks. People were buying gold because central banks were printing too much money. It’s inflation that drives the gold train, not political uncertainty.”

Thu, 02/21/2013 - 14:18 | 3264055 whotookmyalias
whotookmyalias's picture

Peter Schiff makes too much sense.  In a perfect world, he and Ron Paul would have a lot more input on the US govt and Fed monetary policy.

Thu, 02/21/2013 - 13:39 | 3263886 JOYFUL
JOYFUL's picture

...Yesterday, for the first time ever we had all sell orders for gold and silver coins, bars and certificates and not one buy order...

Interesting client base you've got there, Gold Core...well, I guess somebody has to cover the 'fear market'...

I hadn't bought a thing since the 09-2011 slamdown, till this last two weeks...somehow, the way it works, the lower the price goes the more eager I am to buy...whew...good thing I missed out on goldbug school or where ever GoldCore's customers got their training!

 

Thu, 02/21/2013 - 14:09 | 3264026 somethingisrotten
somethingisrotten's picture

I completely agree with you, Joyful.  I have only seen and heard of retail buying yesterday and today.

I bought a stash myself yesterday - the first in years.

So GoldCore has a client base that is quite unusual.

Thu, 02/21/2013 - 14:09 | 3264025 somethingisrotten
somethingisrotten's picture

I completely agree with you, Joyful.  I have only seen and heard of retail buying yesterday and today.

I bought a stash myself yesterday - the first in years.

So GoldCore has a client base that is quite unusual.

Thu, 02/21/2013 - 13:27 | 3263844 Bicycle Repairman
Bicycle Repairman's picture

The days of making easy money in gold are over.  If you are trading it or are leveraged, good luck.

Thu, 02/21/2013 - 15:10 | 3264217 Rusty Trombone
Rusty Trombone's picture

How right you are . My easy money as of late has come from buying and flipping lead and brass - which has let me BTFD with relative abandon lately.  BITCHEZ!

Thu, 02/21/2013 - 13:20 | 3263822 Doubleguns
Doubleguns's picture

Previous margin reduction may have been a setup for this push down in price as those who used the margin are now in panic mode and most likely selling. Things look set up all over the place.

Thu, 02/21/2013 - 13:16 | 3263806 Right-on Left-off
Right-on Left-off's picture

Best case for today.  Emailed to trading buddies earlier.

 

 

Without a huge upleg in POG and POS today will go down as a 'dead cat bounce' or at best a relief rally.  Friday will sign today off as one of the two.

 

Monday is futures expiry and Wednesday, last trading day.  I would not go long or do anything until next week.  That will tell what Thursday really was.  A bottom? or a bounce/relief rally?  Next week will confirm one or the other or possibly a bottom if POG and POS take off.  That would be or typically is out of the question with end of the month trading.

 

I would have to say that most of the emphasis is on the Dow and the S&P.  Can't have those crash after the 3% in Asia last night and what is shaping up as also a big equities dump in Europe.  Almost 2%.  The big disaster for the FED and the CB's would be to let equities dump in Europe and do it again for a 2nd day in the US especially going into Friday with no economic news at all.

 

For reference, for POG to look like a bottom with a rise into an uptrend, it will have to claim $1585 and not turn back.  The number for POS is $29.90 with $29.26 as the interim resistance.

 

 

at this time, 12:14, both POG and POS have hit their head on overhead resistance ... Relief rally at best at this moment.  Just a 'bounce' by the end of the day????

Thu, 02/21/2013 - 13:10 | 3263784 Smiley
Smiley's picture

*yawn*

Squeeze play.

Thu, 02/21/2013 - 13:10 | 3263779 NoWayJose
NoWayJose's picture

If the 'bottom' was yesterday when the Fed minutes came out, then it sure looks like someone leaked those minutes two weeks ago, and started shorting gold and silver in anticipation of the day that the minutes came out.

Thu, 02/21/2013 - 13:50 | 3263945 FieldingMellish
FieldingMellish's picture

Leaked? You have it the wrong way around. The "authors" of the minutes took their positions weeks ago and formulated a strategy (see ZH article on 6 hr slam window for silver) to take down Au and Ag into the release of said minutes by their flunkies (aka the Fed). Note that JPM had a HUGE short position on the last COT.

Thu, 02/21/2013 - 12:55 | 3263695 whotookmyalias
whotookmyalias's picture

Come on already. I'm making changing in my paper gold positions to be ready for this.  I feel like that reporter standing in the middle of a hurricane.

Thu, 02/21/2013 - 15:10 | 3264216 OutLookingIn
OutLookingIn's picture

"suspicions of market manipulations..."

N.S.S.!!!

No Shit Sherlock!

And what was your first clue? Just getting it now?

 

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