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Gold Negative YTD In Dollars But Bull Market Not Over - Morgan Stanley

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Submitted by GoldCore

Gold Negative YTD In Dollars But Bull Market Not Over - Morgan Stanley

Gold’s London AM fix this morning was USD 1,563.00, EUR 1,213.79 and GBP 972.62 per ounce.

Friday's AM fix was USD 1,580.75, EUR 1,221.69 and GBP 980.98 per ounce.

Gold fell $12.70 to close at $1,581/oz in New York on Friday. Gold has fallen again today and has now erased the gains for the year. Gold edged up in early Asian trading as bargain hunters lifted prices from four month lows, but gains were capped and prices gradually fell and falls continued in European trading.

Cross Currency Table – (Bloomberg)

Support is at $1,550/oz and a close below that level could see gold test strong support at $1,523/oz and $1,533/oz – the lows in December and September 2011 respectively.

Greece looks certain to leave the single currency – something that was denied could ever happen by policy makers, central bankers etc. for many months. A Greek exit from the eurozone would damage confidence in the single currency bloc but not necessarily be ‘fatal’, Irish central bank chief and ECB policymaker Patrick Honohan said over the weekend.

“Things can happen that are not necessarily imagined in the treaties... it is not necessarily fatal but it is not attractive”, Honohan said.

For Greeks who have left their life savings in euros in Greek banks it might prove fatal to their finances as capital controls are suddenly introduced and their savings are forcibly converted to the Greek drachma overnight. It is estimated that the drachma could quickly devalue by between 20% and 50%.

Spanish 10-year bond yields have surged to over 6.29% leading to concerns of contagion which is leading to sell offs in most markets including gold. However, gold's recent correlation with risk assets will again be short term and buyers should again focus on the long term and gold's proven long term diversification, wealth preservation and safe haven qualities.

While gold is now negative year to date in dollar terms, it remains 0.7% higher in euro terms. This shows that recent gold weakness is primarily due to the recent bout of dollar strength.

Gold in USD – Daily (1 Year)

Money managers in gold futures and options have cut their net long positions by 20%, CFTC data showed Friday.  The plunge means that bullish gold bets are at their lowest level since December 2008 (92,498 contracts), as speculators aggressively unwound their bullish bets in the precious metal after recent price falls.

Gold in Euros – Daily (1 Year)

Bullish silver bets on a silver rally tumbled 32% to 7,159, the biggest decline since late December. This is bullish from a contrarian perspective.

In the physical market, jewellery makers and speculators took advantage of last week's drop in prices according to Reuters and there are reports of physical buying interest and indeed “tight supplies” in the physical market.

Gold prices dropped 3.7% last week and silver fell 5.1% to $28.89/oz. The smart money, especially in Asia, is again accumulating on the dip.

Demand for jewellery and bullion in India has dipped in recent weeks but should resume on this dip – especially with inflation in India still very high at 7.23%.

Also of interest in India is the fact that investment demand has remained robust and gold ETF holdings in India are soon to reach the $2 billion mark.

Gold in GBP – Daily (1 Year)

Morgan Stanley has said in a report that gold’s bull market isn’t over despite the recent price falls.

Morgan Stanley remains bullish on gold as it says that the ECB will take steps to shore up bank balance sheets, U.S. real interest rates are still negative, investors have held on to most of their exchange traded gold and central banks are still buying gold.

Weak hands are again being shook out of the gold market but it remains prudent to retain an allocation to gold and those who do so will be handsomely rewarded in the coming months and years.

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

OTHER NEWS

(Bloomberg) -- Gold May Be Due Short Term Bounce This Week on Technicals 

Gold may be due a ‘short-term bounce this week’’ based on technical analysis, according to Christopher Grosvenor, chief executive officer of Grosvenor Research & Analysis. The following are comments from Grosvenor by e-mail yesterday. RSI is relative strength index.

“Gold could be due for a short-term bounce this week. Big picture, gold may find support in this zone and form the right shoulder of an inverse head and shoulders price pattern that dates back to the end of September last year.”

(Bloomberg) – IMF To Add $2.3 Billion To Reserves Amid Rising Risks

The International Monetary Fund said it had estimated net income of $2.3 billion in the fiscal year ended April 30, which it will add to its precautionary reserves as a protection against growing risks.

“The Fund is facing increased credit risk in light of a surge in program lending in the context of the global crisis,” the IMF staff wrote in a report released today.

“While the Fund has a multi-layered framework for managing credit risks, including the strength of its lending policies and its preferred creditor status, there is a need to increase the Fund’s reserves in order to help mitigate the elevated credit risks,” the staff said in the report.

The Washington-based IMF is co-financing loans to Greece, Ireland and Portugal to help stem the European debt crisis, with Greece representing the IMF’s largest loan on record. As a result, the IMF last month decided to raise reserves in the medium term to about $30.8 billion.

Net income last year was about $6 billion, including a profit of about $4.9 billion from gold sales.

(Bloomberg) -- Gold ETF Assets in India Top Record 100 Billion Rupees in April 

Assets in bullion-backed funds in India, the biggest gold user, exceeded a record 100 billion rupees in April as investors bought the metal for a haven and to diversify away from stocks.

Gold exchange-traded funds, or ETFs, had 102.2 billion rupees ($1.9 billion) as of April 30, more than double the 48 billion rupees a year ago and up from 98.9 billion rupees in March, the Association of Mutual Funds in India said in data on its website on May 11.

Holdings in bullion ETFs globally were 2,383.395 metric tons on May 11, the highest level this month, data tracked by Bloomberg show. Gold futures in India traded near the all-time high reached in December, climbing to within 0.5 percent of the record on May 3 as a weaker local currency boosted prices, while the nation’s benchmark stock index had its biggest weekly decline of 2012 last week.

“The perception in India is at least you don’t make a loss in gold. It’s a safe investment,” Kishore Narne, head of research at AnandRathi Commodities Ltd., said by phone from Mumbai. “When the equity market is not looking attractive and the headline space is grabbed by gold, more investors are being diverted into gold.”

Bullion for June delivery fell 0.1 percent to 28,335 rupees per 10 grams on the Multi Commodity Exchange of India Ltd. as at 10:48 a.m. in Mumbai. Futures are up 3.7 percent this year.

“Gold was traditionally a jewelry-based market, now it’s turning into an investor-based market,” in India, said Narne. Investors will continue to buy gold while prices in India are above 25,000 rupees to 26,000 rupees per 10 grams, he said.

Assets in ETFs were also boosted during the month by buying for an auspcious festival day and as prices rose, said Chirag Mehta, fund manager with Quantum Asset Management Co. in Mumbai.

(Bloomberg) -- Silver Traders Trim Bets on Price Rise, CFTC Data Shows

Hedge-fund managers and other large speculators decreased their net-long position in New York silver futures in the week ended May 8, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 12,563 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 3,021 contracts, or 19 percent, from a week earlier. 

Silver futures fell this week, dropping 5.1 percent to $28.89 a troy ounce at today's close. 

Miners, producers, jewelers and other commercial users were net-short 17,899 contracts, down 5,844 contracts, or 25 percent, from the previous week. 

Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.

NEWS

Euro Officials Begin to Weigh Greek Exit – Bloomberg

Gold, silver fall in electronic trading – MarketWatch

Gold ticks up on bargain hunting; off 4-month low – Reuters

Global shares fall as deepening Greek turmoil weighs – Reuters

Bullish Wagers Plunge Most in 2012 on Greek Impasse: Commodities – Bloomberg

COMMETARY

Gold Bull Market Over?  Not Even Close – Gold Eagle

How euro money printing is going to drive up gold and silver prices – Silver Seek

"We're getting to the heart of why you own gold" – The Golden Truth

JPMorgan Estimates Immediate Losses From Greek Exit Could Reach 400 Billion – Zero Hedge

McWilliams: Bob Marley and Financial Contagion – David McWilliams

 

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Mon, 05/14/2012 - 08:21 | 2423147 scatterbrains
scatterbrains's picture

so MS/GS/JPM/CIA/FED/CFTC want all those underwater gold longs to hang in there  just a little longer before the spring the margin hike on them. I forget even at what price they lowered margins on gold and silver but it was from much higher levels I think... which will make the pain even worse once they flood these markets with paper and jack margins. Somewhere between the bottom of that waterfall and when Greece collapses but before the Fed steps back in I want to flip long. Anyone have any thoughts on what hour of the day (globex wise) all these events will converge ?

Mon, 05/14/2012 - 08:27 | 2423148 GetZeeGold
GetZeeGold's picture

 

 

Limited time only. Ben Shalom will sign every ounce of gold you buy.

 

Watch him cry as you rip it out of his hands.

 

The grand prize winner will receive an ounce of gold signed by Gordon Brown, Bob Rubin, Chuck Munger, and Warren Buffett.

 

 

Mon, 05/14/2012 - 08:38 | 2423171 mayhem_korner
mayhem_korner's picture

all those underwater gold longs to hang in there  just a little longer

 

I suspect a fair number of us "gold longs" here won't be "underwater" - measured by the paper price - until we're well into the 3-digits.  I know I won't, so I look forward to more bake sales.  :D

Mon, 05/14/2012 - 11:37 | 2423855 BooMushroom
BooMushroom's picture

I suspect many of the longs here, going underwater, would still see it as an opportunity to buy.

Mon, 05/14/2012 - 08:25 | 2423153 Quinvarius
Quinvarius's picture

Just the governmental banks helping JPM exit their PM derivatives trades by dumping your national wealth.  JPMs credit detonation trade looked exactly like the trade everyone accuses them of having metals.

To be quite frank about it, the only reason any government would want gold down is to stop the banks from blowing up.  It is illogical to destabilize yourself and make your debt unattractive by trashing your own reserve assets.  Therefore gold raids most likely are private sector bailouts to stop LTCM x 100 from happening.  Buy them.

Mon, 05/14/2012 - 08:26 | 2423159 vegas
vegas's picture

How reassuring that MS still wants to remind its remaining clients that gold is a buy. They must have more to sell. The only thing missing from the gold market is a Stolper buy recommendation to make it official that it's over for a while. If only The Squid could move him to the PM's. We can dream can't we?

 

http://vegasxau.blogspot.com

Mon, 05/14/2012 - 08:42 | 2423184 Quinvarius
Quinvarius's picture

I am pretty sure the banking business model is selling stuff you don't own or doesn't exist to raise money.  Paper gold is as much a target for that as a commodity.  If you are about to die, why not sell a bunch of futures contracts to raise money?  If you die, you just default on the contracts.  It puts a gun the system's head and demands a free bailout.

Mon, 05/14/2012 - 08:28 | 2423163 Peter Pan
Peter Pan's picture

Don't worry about gold. Worry about all those sectors of the economy and all those asset classes that have relied and are still relying on government deficit spending and manipulation. It is almost incredible that the European stock markets are up since December 31 as it just makes a mockery of markets.

That anyone can draw conclusions from movements in currencies is a dangerous game unless one is looking for a quick in and out deal.

When Europe folds its Euro currency I would hate to be anybody holding paper from another jurisdiction let alone the Euro itself.

Even the smarties that have shifted their accounts to Germany might find Germany treating non-resident accounts quite brutally if it seeks to even the score with countries such as Greece and possible other PIIGS.

Mon, 05/14/2012 - 08:40 | 2423174 Bastiat009
Bastiat009's picture

Person A says gold is down because euro is down.

Person A says euro is going to zero. Person A also says buy gold ...

Person A's logic escapes me.

Mon, 05/14/2012 - 08:49 | 2423202 Quinvarius
Quinvarius's picture

Why on earth would you hold any paper money if it is all going to zero?

Mon, 05/14/2012 - 08:55 | 2423218 GetZeeGold
GetZeeGold's picture

 

 

They learned it in college.....it's just less risky.

 

Mon, 05/14/2012 - 09:22 | 2423335 Bastiat009
Bastiat009's picture

My guess: the failed paper money will be replaced by another paper money. It's happened numerous times before. European baby boomers have already known 2 or 3 or more currencies in their lifetime.

Mon, 05/14/2012 - 08:52 | 2423211 Praetor
Praetor's picture

Person B9 keeps telling people not to buy gold

Person B9 keeps telling us that gold is crashing at a faster rate.

Person B9's logic escapes me when they dont understand the term 'rate' in a mathematical sense nor why they would care if one buys gold or not.

 

Mon, 05/14/2012 - 12:40 | 2424111 BooMushroom
BooMushroom's picture

If you buy Euros with leverage, and the price goes south, you have to sell something to pay for your position. If you offer gold at spot-1%, you can get cash RIGHT NOW, which is what you have to do.

So a drop in Euros COULD cause a drop in gold, if enough people are long on both.

However, if the Euro went to zero, gold would not, as evidenced by all of human history.

Mon, 05/14/2012 - 08:40 | 2423179 Bastiat009
Bastiat009's picture

Gold is crashing further and faster every day and yet the same people (usually gold sellers) tell me that I should buy gold because one day it will go up ... the beauty of it is that they come with a new reason to explain the fall and the upcoming rise every single time.

Mon, 05/14/2012 - 08:47 | 2423192 GetZeeGold
GetZeeGold's picture

 

 

It's amazing what you can do with a couple trillion in hot QE cash. Print all you want, I'll be buying the subsidized gold.

 

Thanks Ben!

Mon, 05/14/2012 - 09:22 | 2423337 Peter Pan
Peter Pan's picture

iF YOU HAVE BEEN SPEAKING TO BANKS, PEOPLE AND BUSINESSES, THEY ARE ALL ATTEMPTING TO REDUCE DEBT AND IN THE PROCESS THEY ARE ALSO SELLING GOLD ETC.

CHINA ET AL, ON THE OTHER HAND ARE BUYING JUST DIPS AS THIS SUITS THEM BEST. THEY WILL NOT ADD TO DEMAND, THEY JUST PICK UP THE SLACK IN DEMAND.

DON'T FORGET THAT CHINA ANNOUNCED THAT IT WAS NOT BUYING ANY MORE EUROPEAN PAPER. WHAT DOES THAT TELL YOU?

FURTHERMORE WHAT DOES IT TELL YOU ABOUT THE MARKET FOR EUROPEAN PAPER?

Mon, 05/14/2012 - 12:00 | 2423965 SILVERGEDDON
SILVERGEDDON's picture

I find it interesting that Bastiat and ass hat rhyme. Truly fitting, given your propensity for trolling the evils of metals, and the divine properties of fiat paper.

Gold was $28.00 an ounce when I was a kid. Silver was worth whatever it said on the coin it was minted with. There have been several financial melt downs burning the market and paper investment in half or worse during that period of time, taking all paper to hell in nothing flat. Timing the market to cash out into fiat currency that has been reduced to less than two percent of it's buying power over the last fourty years is stressful, and risky. I'll take my chances on the metals, thanks.

Now go shove a gas soaked rag up your ass so I can light it on fire, and watch you dissappear into the distance, trying to out run the heat. At least you will be more entertaining that way.

Mon, 05/14/2012 - 08:46 | 2423195 Platinum_Investor
Platinum_Investor's picture

Silver is looking attractive as it nears strong support.  Looking to purchase some additional Eagles and Maples

Mon, 05/14/2012 - 08:48 | 2423196 RagnarDanneskjold
RagnarDanneskjold's picture

China's gold bubble

Gold isn't a bubble, but China's investment behavior resembles that of other bubbles. 

Mon, 05/14/2012 - 08:49 | 2423203 agent default
agent default's picture

Even if gold goes down it's value will never go to zero.  Can you say the same about paper assets?

Mon, 05/14/2012 - 08:55 | 2423222 GetZeeGold
GetZeeGold's picture

 

 

Well you've got to admit......some of that paper is pretty damn pretty.

 

Mon, 05/14/2012 - 11:09 | 2423722 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

BINGO!

Mon, 05/14/2012 - 09:03 | 2423257 RoadKill
RoadKill's picture

In a deflationary, Europe blows up scenario Gold will trade lower then the SPX. So you are better off buying short ETFs and then buying gold at a much lower price with your much larger pile of fiat.

In a print to the moon, Euro bond scenario Gold will go up. But not as much as silver or platinum or Spanish/Italian/Greek Rquities with a short Euro hedge.

Mon, 05/14/2012 - 09:07 | 2423277 junkyardjack
junkyardjack's picture

Banks planning on shorting that shit to make the quarterly numbers.  Retail moved into Gold from stocks, time for their punishment...

Mon, 05/14/2012 - 09:41 | 2423391 z123
z123's picture

gold is dead, $1560, glad I didn't buy the hype where is $3000 ?

Mon, 05/14/2012 - 10:50 | 2423664 sumo
sumo's picture

I'm buying PMs (gold and silver) because there is nothing else I trust.

That said, I'm sick of the pumpers like James Turk ejaculating each week that silver is going to $70 Real Soon Now.

Gold and Silver are going to get hammered very hard before this debt-and-corruption supercycle is over.

 

Mon, 05/14/2012 - 10:03 | 2423481 TheGardener
TheGardener's picture

Fiat up, everything sown and planted. Can`t buy rain, but gold still shines.

Mon, 05/14/2012 - 10:31 | 2423614 bentaxle
bentaxle's picture

We've been warned again and again this is what would happen. Like it to go a lot lower please!

Mon, 05/14/2012 - 11:07 | 2423714 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

Yeah, and Dollars are a negative yield to date in Dollars.

lol.

Mon, 05/14/2012 - 11:14 | 2423739 kekekekekekeke
kekekekekekeke's picture

listen I did the bulk of my stacking in 2009 frankly I am getting tired of waiting for it to go up.  So please go up PMs I've had enough dilly-dallying  

Mon, 05/14/2012 - 12:28 | 2424075 gnomon
gnomon's picture

Be careful what you wish for.  If PMs skyrocket, that means currencies are dying, cities are burning, and you better be armed 24/7.

Owning PMs only has a 30 per cent chance of paying off in a meaningful "real world" way.  But, given that, owning "paper" has a zero chance of paying off in any conceivable future scenario with things as they now stand.

But even if owning PMs don't pay off in a "happily ever after" fashion, (at some point converting to them to other assets or some new fiat currency after stasis has been achieved), at least you better control your destiny right up to the bitter end.

I see little chance of any happy endings anywhere in the world.  We are working the edges of a looming disaster.  It is beyond any one person's ability to carve out a secure financial future with such conditions.

 

Mon, 05/14/2012 - 14:55 | 2424539 Bizaro World
Bizaro World's picture

gn, concur with your your first sentence, but then disagree with your remaining post. Case in point, "Owning PMs only have a 30 per cent chance of paying off...." Totally disagree with that. Please provide the link and/or reasoning behind said percentage.

 

In terms of PMs purchasing power, one could argue that PMs have an extremely high, I would argue 90+%, of retaining or gaining purchasing power over related fiat currency.

"Since 2001, for instance, gold has risen 78% and the U.S. dollar has declined 30%, (using the dollar index).

If we go further back in time, we see that the dollar has lost about 95% of its purchasing power since 1913. And since 1971, when the U.S. removed the dollar from the gold standard the dollar has fallen 70%!"

Read more: Invest in Gold http://dailyreckoning.com/invest-in-gold/#ixzz1us6JrYRy I have no affiliation with website above, simple quick google search to justify my argument. BW

 

Mon, 05/14/2012 - 15:53 | 2424713 gnomon
gnomon's picture

Sorry about my imprecision.  It was a loose guesstimate about the world's chances.   And the meaning was that we will have to thread the eye of a needle in a hurricane in order to come out on the other side intact with the ability to enjoy the benefits of our pm "insurance".

I don't disagree with the thrust of your argument, if the world holds together, and a market environment somewhat similar to today survives, with or without Central Banks.

If we end up just running through the jungle waiting to be picked off by accident or mayhem, then the world has not threaded the needle.

Mon, 05/14/2012 - 12:55 | 2424166 DosZap
DosZap's picture

listen I did the bulk of my stacking in 2009 frankly I am getting tired of waiting for it to go up.  So please go up PMs I've had enough dilly-dallying  

Instead of crying WOE unto me, be glad you got it in '09..................

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