Overnight Sentiment: Gold Rout Halted For Now

Tyler Durden's picture

Yes, there was economic news overnight, such as a Eurozone and UK CPI, both of which came in line with expectations (1.7% and 0.4% respectively), and a German ZEW which confirmed Europe's accelerating deterioration, tumbling from 48.5 to 36.3, far below expectations of a 41.0 print (somehow the huge miss has managed to push the EURUSD up by 60 pips to an overnight high of 1.31 but this is merely the pre-US open manipulation to ramp US equities higher), just as there was news that Angela Merkel's support for a Cyprus bailout is growing (was there an alternative?), and that as part of their ongoing investigation into Italy's repeatedly insolvent Monte Paschi, investigators had seized €1.8 billion worth of assets from Nomura Holdings, and that Spain as usual sold more Bills than expected, driven by oversize Japanese and Pension Fund purchases, but what everyone has been looking for is whether the relentless and record rout in gold is over. For now, it appears that is the case, with gold printing an overnight low of just over $1320 and ramping higher ever since, up 3% so far and rising.

Amusingly, Goldman was stopped out on yet another trade overnight, this time its Commodity Carry Basket which hit the firm's -6% stop loss signal, and yet even with gold crossing Goldman's target, the firm has so far refused to close out its position:

Although gold has now traded below the $1,450/toz target embedded in our short recommendation, we are maintaining our short as we argued last week that prices could decline more than we initially thought as positioning is stretched and the momentum is to the downside. The most recent ETF holdings showed acceleration in the liquidation of length, which points to a broad-based sell-off extending beyond the futures markets with potentially more room to go. As a result, we are now lowering the stop to $1,400/toz (which locks in a potential gain of 12%) while we wait for evidence of a bottom, though we are not changing our price forecasts now.

Looks like Goldman has much more gold to buy from its muppets, who continue being routed on the firm's various other trading recos with realized losses.

Below are some other fresh overnight view on gold:

Credit Suisse:

  • The price is now not far from the level CS’s technical analysts identify as the next key area of support: $1,310
  • Next key level is $1,156, then $1,122; Beyond that, $1,000


  • Factors affecting the metal: April 10th FOMC minutes showed some members favor an early end to QE, a shift out of commodities into equities and bonds, ongoing gold ETF liquidation and reduction in net longs on the Comex
  • Price break of $1,525/oz followed by $1,500/oz at the end of last week were important technical support and psychological levels
  • Of the top 20, 17 of the biggest drops occurred during the 1970s and 1980s; this daily drop is the biggest for 20 years with the next biggest occurring in Oct. 2008 at the height of the financial crisis
  • Expects “slow grind” higher


  • Gold is the key sentiment setter among commodities; price moves appear to be the result of a concerted short sale by funds trading futures
  • Seems to have been a series of drivers behind collapse; key has been the potential for an end to QE in U.S.
  • Will be a while before there can be a strong rally;  would require a big policy mistake from a major central bank to reignite anti-dollar sentiment


  • Although risks still skewed to downside, an attractive entry opportunity is unfolding, especially if gold consolidates around next technical support level near $1,250/oz
  • Recent selloff is an exaggeration; sales of ETFs have unwound almost all of the eurozone crisis buying seen in 2012


  • Longer term fundamentals remain unchanged
  • Gold likely to bounce in 2H and move slowly upward as inevitable further monetary easing comes to play


  • Collapse represents “an extreme capitulation”
  • Investment case remains fundamentally unchanged


Finally, both the bank of Sri Lanka, and the Azeri oil fund thanked whoever was selling the paper gold, saying the drop represents a buying opportunity and both would continue to capitalize on the cheap physical prices.

Looking at the day ahead, in terms of perfectly irrelevant fundamentals which no longer move any risk assets, we have housing starts, permits, industrial production and CPI. Large caps including Cocacola, Goldman Sachs and Johnson & Johnson
will be reporting earnings before the opening bell, followed by Yahoo
and Intel who report after the US market closes.


Key macro observations from SocGen:

Markets retain full confidence in central banks to soothe the path to economic recovery, but this did not halt the correction across risk assets from deepening yesterday on a variety of factors which brought commodties crashing down to earth. Is China’s growth slowdown turning into a bigger scare for global demand?

The Fed is still moving towards an exit strategy, but the timescales remain highly uncertain. The latest US economic indicators have disappointed, holding back any sense of urgency to start tapering bond purchases. Today’s housing market and industrial production data are expected to point in the same direction.

The BoJ is on the offensive and the question is how much further the JPY will fall. SG strategists cut their 1y USD/JPY projection from 103 to 110. Sudden moves in both the USD/JPY and EUR/JPY since the 4 April meeting prompted a pause at the beginning of the week. This was also fuelled by lower-than-expected Q1 2013 Chinese GDP. Nevertheless, the downward trend in the JPY is clearly under way and a positive outcome for US housing construction and production data today should put USD/JPY back on track for a test of 100.00. The ECB is also accommodative and further policy easing has not be ruled out: a weak German ZEW index today will boost expectations of central bank stimulus. Draghi will testify to the EP today. The BoE may well be the G4 central bank with the toughest policy challenge as CPI continues to deviate from the target, growth is lackkustre  and credit demand weak. Another increase in CPI is on the cards today.

Overall, G4 central banks remain very prudent, leaving the markets overflowing with liquidity, which will underpin the search for yield in the short term. Any easing in US yields, weakening in the AUD, downturn in the USD/JPY or upturn in the EUR/USD will offer opportunities to position on medium-term directional coverage strategies on long US rates, an upturn in the USD/JPY or a downturn in the EUR/USD.

* * *

The full overnight summary from Deutsche's Jim Reid:

Markets were already having a difficult day prior to the Boston explosions with Gold in crash territory (more below). The S&P 500 was already down 1.4% prior to the explosions but closed -2.3% as the magnitude of the events became clear. The big move of the day was the one that saw the Gold market crash as it fell 9.1% to $1348/oz. This is the 5th largest daily fall since the US suspended the convertibility of the Dollar into Gold in 1971, the point which heralded the move from a Gold based global monetary system to a Fiat based one. It was also the largest single daily fall since the 28th of February 1983.

Over the last two sessions, gold has fallen 13.7% which also makes it also the 5th largest two-day fall since Bloomberg records began in 1920. So what’s been behind the price move in gold? There has been a lot of talk that the technicals had been skewed in the lead-up to last Friday. Newswires suggest that a number of large gold investors have been forced to unwind following the triggering of stops in the $1400-1500/oz range and that several brokers who were caught long have been forced sellers in the last couple of sessions. The WSJ reported that more than $1bn flowed out of physical gold ETF, SPDR Gold Trust, on Friday marking the third-largest outflow on record since the fund’s inception in 2004. The SPDR Gold Trust shed nearly 4% or $2.3bn of its assets last week, ending Friday with roughly $57 billion. Trading volume in the SPDR Gold Trust on Monday was running more than 7x the average and was the heaviest on record, topping the previous high set in December 2009. On the macro side, there has been talk of lower Chinese retail demand amid the recent slowdown in domestic growth and the more benign inflation trends seen recently in China. Last week’s report that Cyprus may sell part of its gold reseves to raise an estimated EUR400m for its bailout has also fuelled suggestions that other indebted countries may follow suit. Our commodity strategists write that fundamentally the economic indicators are disappointing in the US and the Fed is cooling on its QE stance – reducing demand for the gold as a hedge. They also note that with marginal industry costs for the gold mining industry at around the USD1,300/oz - the market could see some support around that level if this situation worsens.

Over the past few weeks, gold has also failed to rally despite the events in Cyprus in late March and the BoJ’s announcement of a new monetary easing regime in early April. One would normally expect that the threat of a country leaving the Eurozone, deposit haircuts, capital controls and unprecedented levels of easing by a major central bank, all occurring within a short span of time, would be enough to send gold higher. The fact that it hasn’t was probably disappointing to those who had held gold to hedge against those risks, and suggests that the marginal buyer of gold was already fully exposed. In other news, Citigroup's better than expected earnings ($1.29 vs $1.17 expected) yesterday failed to offset the negative sentiment during the US session. The bank reported sluggish net interest margins and loan demand, echoing similar statements from JPMorgan and Wells Fargo last week in what may be the beginning of a recurring theme for US banks this reporting season. Despite the negatives, Citigroup (+0.2%) was only one of seven S&P500 stocks to finish higher yesterday.

Turning to overnight markets, commodities are having a mixed session with Brent (-1%) continuing to trade weaker but gold (+1.1%) and copper (+0.3%) paring some of the recent losses. The USDJPY and AUDUSD have stabilised at 97.55 and 1.036 respectively following sharp corrections yesterday. In terms of equities, most Asian bourses are around half a percent lower with oil, gas and mining sectors stocks leading the declines. The KOSPI (+0.1%) is outperforming despite a warning from the North Korean military to South Korea that a strike “will start without any notice”. The South Korean government unveiled a 17.3trillion supplementary budget to support exporters who have been pressured by a weaker yen and this is boosting sentiment. Staying in the region, overnight Moody’s affirmed China’s rating of Aa3 but changed its outlook from positive to stable. The rating agency wrote that progress in increasing the transparency of local government debt and reducing credit growth were less than anticipated. The move comes one day after China reported its fourth consecutive quarter of sub-8% GDP growth – the first time this has occurred in two decades, according to Bloomberg data.

We have a busy day ahead with the immediate focus likely to be on the fallout from the tragic events in Boston. On the data front, we have the Italian trade report, Eurozone and UK CPI and the German ZEW survey in Europe. Mario Draghi will be presenting the ECB’s annual report to the European Parliament at 2pm London time. In the US, the data highlights include housing starts, permits, industrial production and CPI. A number of large caps including Cocacola, Goldman Sachs and Johnson & Johnson will be reporting earnings before the opening bell, followed by Yahoo and Intel who report after the US market closes. The IMF publishes its World Economic Outlook and Fiscal Monitor report today, and the Fed’s Janet Yellen will chair a monetary policy panel at the IMF’s Macro Policy conference. The BoE’s Mervyn King will also be participating in the discussion.

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jeebus's picture

Do we think there is one more gold smack down left??? Will we see 1250?

GetZeeGold's picture



If it's your first time.....you gotta fight.

Gief Gold Plox's picture

BTFD if you can.

An old lady was in front of me at the shop. I was there to pick up may yesterdays purchase. From her crappy looking purse she  took out 150K euro and some change and basically cleaned the shop dry. As of this morning no deliveries are possible till April 30th. I've been trying to get a hold of some silver at these prices, but ain't noone selling for less than spot +20% right now.

Crazy out there.

Manthong's picture

It’s just a good thing there was nothing else happening in the world to take people’s attention off of the peculiar and sudden hysteria to flee to the safety of government’s warm monetary embrace.

“Help me Obi wan Bernanke, you’re our only hope.”  

Pinto Currency's picture


If Andy Maguire is right that there has been rejection of delivery requests by bullion bank(s) on the LBMA, then there is a high potential of a further physical squeeze on the fractional gold LBMA positions.


SmallerGovNow2's picture

APMEX ASE's going for 6.50 to 8.00 over spot depending on quantity and method of purchase.  That's about 33% over spot!

Urban Redneck's picture

Spreads look relatively stable here in Switzerland compared to the last few months, and there is supply available, but the fact that Crapmex is down to generic kilo bars implies the strong hands are busy on the other side of the pond. 

TWSceptic's picture

Nice gold rally today. Is that you Goldman Sachs buying up the dip?

nmewn's picture

This may be as good as it gets.

unwashedmass's picture



maybe not. maybe the canadians --- unlike the british --- will be brave enough to tell people what is going on. 

the program is scheduled for thursday night and being publicized. 

last time, the BBC pulled the documentary they prepared........

let's see if the canadians -- while very polite people often unwilling to offend --- have the balls to defy JPM. 

GOSPLAN HERO's picture

Lots of empty shelves at APMEX and ProvidentMetals.

GetZeeGold's picture



Having a hard time putting a price on the IOUs at the moment.

JonNadler's picture

Everything is stock delayed at Provident

GetZeeGold's picture



Dude....don't say that. You could start a riot.

Being Free's picture

Liberty c&pm sent out the following:

"Online ordering will be available from 7:30 am to 5:00 pm PST this week, due to volatility. We expect to resume extended ordering hours early next week.

Please note that we are seeing extreme tightness in the physical markets at this juncture, and as such delivery times may take up to 4 weeks."

I guess in this NWO this is the way markets work; if supply drops so does price.  WTF

LibertarianX's picture


Earth quake here in abu dhabi

Maybe another one in Iran?

Stronger than last week

Everybody evacuating our tower


mick_richfield's picture

I hope you are safe LX !

The world cannot afford to lose any of its Libertarians.



quake was 7.8, near middle of Iran / Pakistan border.

Proofreder's picture

USGS - it's a biggie - 7.8 preliminary reading, near western edge of plate boundry.

Not good to be that high.

jover's picture

i bought some at 1350. If it drops more, i'll buy some more.

If the prise rises, though, i'll buy some more!

Hell, whenever i get some fiat, i'll buy some more.


ArkansasAngie's picture

If it isn't one thing, it's another.

There are no free markets.

GetZeeGold's picture



I don't get it.....stawks should have been up a 1000 points yesterday.


Who's in charge of this goat roping contest?

q99x2's picture

I pray for a peaceful day. And, the paper gold market is pretty much its own market so not much to be concerned about except for the Morgue stealing from the paper holders.

Sheeple Shepard's picture


  • Collapse represents “an extreme capitulation”
  • Investment case remains fundamentally unchanged

You can say that again. If anything it has become more bullish for the contrarians among us. Never was a follower of fashion.

Winston Churchill's picture

Whatever it was that happened is being kept under wraps.I expect we will

find out Friday after hours if they stick to form..

The smackdown just emptied the shelves, not the reaction TPTB expected.

Hardly the infallible obermensch they believe they are.

Whats going on in the shadow banking system Tyler ?

JonNadler's picture

that's not the way it supposed to happen, you little sheep were supposed to panic and dump everything  and listen to Goldman Sachs not empty out all the dealers in the world!!

Rubicon's picture

You need to change your avatar pal. I keep thinking you are about to speak a load of bollocks.

JonNadler's picture

well...but just look at my name, doesn't that lend credibility to my writings regardless of the avatar?

Croesus's picture

I was wondering about that....

Obadiah's picture

yeah flipp the pic so its looking over the right hand

augustusgloop's picture

do you think they care about a few little guys like myself trying to get their hands on silver eagles? there was obviously much bigger business to attend to - we were just the recipients of all this. 

toady's picture

I'm sticking with the theory that they drove the price down for the Cyprus purchase. Those couple of hundred $ per ounce really add up when you're buying ten tons!

Sheeple Shepard's picture

"The smackdown just emptied the shelves, not the reaction TPTB expected"


Unless they (TPTB) are the ones filling their deep pockets. Sell paper buy physical. Prepare for inevitable s**tstorm.

RaceToTheBottom's picture

Pretty soon an OZ of gold will buy a Fiat.  A Fiat car that is.

Room 101's picture

Could also be a dead cat bounce. 

screw face's picture



BTFD, then kiss your ass good by.

Engage big red button factor!

disabledvet's picture

First off the plan is to find out what happened in Boston. This seems very similar to the Times Square attempt so clearly "there is an enemy among us." in World War Two and Vietnam we let our freedoms do the talking so we didn't have these "fear problems" (mass hysteria/paranoia a seeming abscence of law) that we do today. Having said that if we are to look at this in strictly financial terms (and no I'm not crying over my Treasury bet...yes many other things...but no not the loss of my country) then clearly "Boston" as it is now called means further aggregation of wealth into banks and (what's left of it at least) Wall Street.

Sheeple Shepard's picture


"Tall buildings swayed in the Indian capital Delhi, reports say."


GetZeeGold's picture



Good for you......bout time.

razorthin's picture

From weak hands to strong hands, bichez.  The Eurozone can dump all its gold and none will make it to market.  It's equities that should be dumped here, bichez.

cutefarts's picture

Magnitude 7.8 Quake Hits Iran, USGS Says



RaceToTheBottom's picture

Probably caused by some black art programming by secret government agencies

reader2010's picture

Gold's P&F Chart prints $920 as the next stop while $10 for Silver. 

Sheeple Shepard's picture

Charts? Like reading the schematics of the Titanic whilst its sinking.

cutefarts's picture

Those fresh shorts who joined the bandwagon from overnight asian and NY sessions yesterday might be sitting quite nervously with this bounce.

Diogenes's picture

After yesterday we all need fresh shorts.

reader2010's picture

Three days ago its PF chart said $1300 as the next stop