Why Has Gold Fallen In Price And What Is The Outlook?

Tyler Durden's picture

From GoldCore

Why Has Gold Fallen In Price And What Is The Outlook?

Gold’s London AM fix this morning was USD 1,590.25, EUR 1,245.20, and GBP 1,005.34 per ounce. Friday's AM fix was USD 1,588.00, EUR 1,251.08 and GBP 1,005.13 per ounce.

Silver is trading at $28.45/oz, €22.37/oz and £18.06/oz. Platinum is trading at $1,470.50/oz, palladium at $616.00/oz and rhodium at $1,325/oz.

Gold rose $17.70 or 1.12% in New York on Friday and closed at $1,591.40/oz. Gold has been trading up and down in Asia within a narrow 8 point range and is now trading in Europe near $1,592.16 at 1150 GMT.  The Canadian markets are closed today for Victoria Day. 

 
9-11 Silver Medal produced at US Mint next to Military Academy at WestPoint, NY.

Gold edged up in line with the euro as G8 leaders pledged to keep Greece in the eurozone.

Investors remain cautious as the world leaders had no specific plan declared for Greece, who will face new elections next month.  Leftist leader, Alexis Tsipras said he would meet with other EU leaders and negotiate new terms to keep Greece in the eurozone if he was elected.

ETF holdings bounced back from the 3 ½ month low hit last Thursday to 69.884 million ounces on Friday.  ETFs hit an all time high in March when they were at 70.89 million ounces.

There are  few a factors that have led to gold falling in price in recent weeks despite the worsening Eurozone debt crisis and deteriorating economic data from the US and elsewhere.

Gold Has Fallen Due To

Gold’s recent weakness is in large part due to a period of recent dollar strength. While gold in dollar terms has fallen by 25% ($1,920 to $1,540), gold in euro terms is only down by 14% (from €1,374/oz to €1,210/oz). 

Oil weakness – since the end of February, oil has fallen from $111 a barrel to below $95 a barrel (NYMEX) today. Gold and oil are often correlated and many buy gold to hedge inflation that comes from higher oil prices.

Gold’s weakness may also have been due to wholesale liquidation in all risk markets due another bout of "risk off" which has seen global equities and commodities all come under pressure.

Physical demand from retail investors in the western world has slowed down as did demand from India in recent weeks due to the increase in taxes on bullion (since removed).

Much of the selling has been technical in nature – whereby more speculative elements on the COMEX who trade gold on a proprietary basis have been selling gold due to the recent price weakness and the short term trend clearly being down. This has led to speculative longs now having their smallest positions since December 2008.

Gold’s Outlook Remains Positive Due To

Central bank demand remains robust and central banks are set to be net buyers of gold again in 2012. 

Demand for physical gold remains robust in much of the Middle East, Asia and the Far East with strong demand seen in particular in Turkey (for Middle East) and in Hong Kong (for China).

Continuing zero percent interest policies in major developed economies and negative real interest rates remain the primary driver of the gold market. As long as there are negative real interest rates in the US and in most western economies, gold is likely to continue to rise in value.

The problems in the Eurozone are far from resolved and the short term panacea policy ‘solutions’ of recent months have almost certainly made matters worse and increased the risk of contagion in the Eurozone whereby periphery nations are forced to revert to national currencies or the euro itself is devalued and debased. 

Conclusion 

GoldCore continues to believe that gold may rise to the inflation adjusted high of $2,400/oz in the coming years. Given the risk of contagion and currency devaluations in the Eurozone, euro gold should rise to above €2,000/oz in 2013.

Gold remains an essential diversification and those who have a 10% allocation to gold bullion will be rewarded again in the coming months as macroeconomic, monetary and systemic risk is likely to become elevated again.

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

NEWS
Shares, euro steady but Greek worries weigh - Reuters

Gold gains on steady euro; Europe concerns stay - Reuters

Gold Extends Advance As Wen Comment Boosts Stocks - Bloomberg

COMMENTARY
Sprott sees great things for gold and silver - Mineweb

Gold bushwhacked the bears last week. It’s even got gold bugs talking about gold stocks … again. - MarketWatch

Gold edges higher as dollar softens - MarketWatch

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LuKOsro's picture

Is it a triple bottom or a bearish flag on the daily chart ?

GetZeeGold's picture

 

 

Geez louise.......gold was up over $30 on Thursday and over $17 on Friday.

 

The markets seem to have all of the attention span of a nat these days.

 

Go buy some AAPL and FB and go back to bed.

 

LuKOsro's picture

Thank you very much Sir for the deeply eloquent analysis. I shall resume the AAPL and FB purchases.

Harlequin001's picture

Oh come on guys, "Gold’s weakness may also have been due to wholesale liquidation in all risk markets due another bout of "risk off" which has seen global equities and commodities all come under pressure."

Who's selling? Hedgefunds, central banks? Not

Wholesale liquidations should be driving the price UP. Quit making excuses. That market is rigged...

Pegasus Muse's picture

GoldMoney's James Turk interviews Sprott's John Embry on gold & silver. 

 

Interviewed by GoldMoney founder James Turk, Sprott Asset Management's John Embry remarks that "if you're negative on gold, you must be bullish on curency, and I don't see how anyone can make that argument."

The comment is part of a conversation about how the bull market in gold is far from over. Interview is 33 minutes long.

http://www.goldmoney.com/video/john-embry-and-james-turk-on-why-the-gold-bull-market-isn-t-over.html?gmrefcode=gata

 

Born Patriot's picture

The reason why gold has fallen is obvious to all apart from the most delusional conformists. Gold AND silver have fallen due to obvious manipulation by Barack HUSSEIN Obama and vice 'president' Joe Biden, who have been consistently and deviously manipulating the precious metals to assist their multicultural agenda. Put a stop to this madness - Vote Ron Paul 2012.

GOSPLAN HERO's picture

Stop demeaning the CSN naval ensign.

 Your comments do not bring dignity to a great battle flag.

 

Harlequin001's picture

THAT'S a battleflag?

Harruumpphh! Well I wouldn't follow it...

GOSPLAN HERO's picture

No one is asking you to follow anything  ... get a cup of coffee and relax.

Harlequin001's picture

Phew, ok...

nice colours though...

Urban Roman's picture

It is an inverted head and shoulders fake.

'S all good! BTFD

Harlequin001's picture

This is real easy, sell all your gold and silver...

when they stop printing money...

Xkwisetly Paneful's picture

So they stopped spewing money why didn't anyone sell?

Why did I read one delusional post after another offering reassurance at $2000/oz?

But the funniest part is this belief that gold/silver are special, government spewing sent the prices of everything but wages and US home prices higher but buy gold it is special. Oil blew if off the face of the planet performance wise as did numerous others but buy metals, they're special.

I went fishing this weekend, sign says live bait here, I go in buy some worms and all of a sudden guys starts going off trying to sell me AU/AG. Finally he said, the fish are smart they go physical.

GMAFBA go pray Ben starts spewing again so I can read how awful it is from people lining their pockets thanks to it.

 

Harlequin001's picture

Hmm...

At what point did they stop spewing money?

Crumbles's picture

Perhaps a more telling analysis can be derived from the 8-hour chart where we can see the metal declining from the early March high just below $1800 to the recent low near $1525 in a clearly defined down channel with a midpoint near $1580 - at a sustainable angle of decline.  Since $1700 slipped away in the middle of March, Gold has been unable to recover in a series of dying cat bounces and now may be poised at the beginning of a great leap upward, to be  confirmed with an upside breakout from the downchannel at $1675.

Physical at $16 - 1700 will look like a tremendous bargain come September.

This looks like as good a day as any to sell ES and buy some miners.

Just my humble opinion.

engineertheeconomy's picture

Physical under $2000/oz will look like a bargain when it hits $10,000/oz

 

Snidley Whipsnae's picture

An even more telling analysis can be found by reading this link...

Especially the last portion that details China, Russia and the remainder of the SCO and their long term objectives...

"Manipulating the Bullion Markets" ... Macleod

To view pdf article see link at http://jessescrossroadscafe.blogspot.com/

Or, view here http://news.goldseek.com/GATA/1337587942.php

The most interesting portion of Macleod's discussion is near the end, and includes some discussion of the SCO, which is an 'unmentionable' in Western Press, even on this site...

"We must also note that China legalised gold ownership for her citizens in 2002, and Chinese savers have rapidly become keen buyers, almost to the level of the Indian public. The central banks for Russia, China, India, Iran, Belarus and Sri Lanka have all bought gold recently. The fact that China has substantial gold interests, both at government and at individual levels, suggests that she is aiming for the yuan, backed by significant gold reserves, to be the trade settlement currency of choice for the SCO region.

We must think about the implications.

Here is an economic and political bloc that is building its combined gold reserves, and increasingly stands to benefit from a rise in the gold price. Meanwhile, we have every reason to suspect the Western central banks, including the US, have been feeding gold into the market over the last thirty years, and have either not declared these sales in their central banks’ accounts, or are hiding them quite legitimately behind the sight account system. The United States and the Euro Area officially hold 18,926 tonnes. It is quite possible that much of it no longer exists as central bank reserves, given the continual attempts to de-monetise gold completely since the Nixon Shock 40 years ago. Add to that the inherent short position on the London Bullion Market, probably a further 3-4,000 tonnes, and the price potential on discovery could be spectacular."

?

FeralSerf's picture

Not central bank gold -- more likely Yamashita gold deposited in UBS by Marcos and then stolen from Marcos (who also stole it) -- allegedly over 100,000 tons.  George HW Bush and his CIA aided by the Fed and its owners was deeply involved with the theft.

www.phoenixsourcedistributors.com/000510.pdf

Xkwisetly Paneful's picture

Is this article some kind of joke?

Gold dropped in price from lack of government spewing just like everything else.

 

Bastiat009's picture

"Gold’s recent weakness is in large part due to a period of recent dollar strength."

So, I ask, yet another time, what will happen to gold price when the euro dies? Will it go to $100/oz or $3,000/oz?

It is written here that gold loses value when the euro loses value.

"Gold remains an essential diversification and those who have a 10% allocation to gold bullion will be rewarded."

Gold value will increase, they say, but you shouldn't have more than a 10% allocation.

All those mixed signals are very confusing.

Bazinga's picture

Bastiat,

There seems to be a big long position on the Euro being taken by the Commercials. Consider that the Euro will not be allowed to die.

http://www.jsmineset.com/wp-content/uploads/2012/05/clip_image002_thumb1...

Bastiat009's picture

I understand that big banks can't afford to let the euro die but they couldn't afford to let the real estate market crash either.

I am just wondering if gold can protect you against the fall of the euro because it hasn't been obvious over the past few years.

narnia's picture

Nothing is immune from deflation in bank runs / deposit flight, which we are seeing in the EUR periphery & China. Central banks cannot keep up with fractional reserve contraction at a 9 to 1 clip.

engineertheeconomy's picture

Bank runs do not change the M3 nor do they have anything to do with inflation or deflation.

It simply changes the location of the currency, and screws the evil Bankers.

Take all of your money out, and buy precious metals.

The objective is to get all the Gold and Silver away from the Bankers and into the economy

Urban Roman's picture

Depends on whether the Euro goes to heaven when it dies.

Peter Pan's picture

Gold will eventually have no price because one day it will once again become the price.

sessinpo's picture

Bastiat009                     2446880

"So, I ask, yet another time, what will happen to gold price when the euro dies? Will it go to $100/oz or $3,000/oz?

It is written here that gold loses value when the euro loses value."

 

Comment

I have given broad statements regarding this. Markets are not easy to trade, thus everyone would do it but the fact is, someone has to be on the short end of the stick. In regards to gold, the problem is you have various speculators around the world and various currencies to compare gold too. So while the euro implodes, those in europe without access to international trading may find gold a great store of value or one that may increase largely. But over here in the US, I think it is likely that PMs will rise, but moderately. Why, because our debt denominated in dollars is about to implode. This is a deflationary scenario and not like the 1970s. We are not yet at the point of dollar destruction which is more of the 1970s. I say this because despite all the dollar printing, it is debt that is/has outpaced production and dollar printing.  So a strong US dollar (as people scramble to get dollars to service debts) will keep a lid on PMs. That doesn't mean PM's can't rise as it is a global economy. We may see pressure downward on PMs because of the US dollar strength, but also upward pressure because of the euro collapse. Thus I say a moderately rising gold market.

In an era of nationalism, we also see the repatriotism of gold, we have already seen the start of it with Venezuela. A few other nations are doing the same. And if we get to a point where currencies are really backed by gold, we have an imbalance worldwide and probable war on a large scale. There is historical presedent for this. Finally, you can throw in the rest of the demand supply fundamentals as in how much gold is in circulation and what will be the demand from the various industries. In bad economic times, demand declines as you can imagine. We see that in oil whereas $200/barrel was once the talk, oil is having a hard time staying above $100/barrel.

So at this point, I advocate hold a portion of your money in PMs, but certainly don't bet the farm on it.

GetZeeGold's picture

 

 

OK.....and just where did I put my shocked face again?

 

Bazinga's picture

As long as the central banks pump liquidity into the system to induce inflation, it bodes well for gold. Because of the massive debt and the constant deflation/inflation battle these banks are fighting we will continue to see gold price dips and then upswings. One thing is for certain, since the world economies (especially the US) cannot be taken of off life support, gold has a long way to climb :)

Protect thyself and buy the dips!

Crash N. Burn's picture

Exactly, the banksters will print until they can't:

Mike Maloney lectures banksters - deflation then hyperinflation

 

Until that changes, gold and silver remain the play (physical of course).

dannyboy's picture

Not like GoldCore to miss the obvious.. Coming off the CB induced sugar high, and another one of the main reasons in my opinion is the need for a "deflationary threat" from the market so Bernank and the crew can start another round of QE / LTRO. This can't happen without at least a 10-15% drop accross all asset classes and thus forcing everyone into dollars making short term demand for dollars higher, thus making the cross-correlation negative for gold.

WmMcK's picture

GSR is back over 56.
Setting up for a correction back to 48 (in 3 stages).
Measuring PM's in fiat is meaningless.

engineertheeconomy's picture

Having to buy a larger safe because the old one is no longer big enough means everything

FranSix's picture

Gold prices are weak?  Dollar is strong?

In order to complete your intention to intervene in gold markets, you need a central bank that leases its gold, a bullion bank with brokers that are willing to sell these leases into the market as if they were physical bars, and a hedge in case you're wrong that prices remain robust.

It has to be increasingly expensive to hedge short sales in gold.  A substantial loss by any of the big players in the gold market will send a shock wave through markets, and anyone in a position to short gold will think twice about an increasingly risky proposition.

Without any major changes in interest rates at this point, such as entering into negative nominal rates, and steadily negative bullion lease rates, it would have to be a monetary crisis such as the breakup that drives gold.

cnhedge's picture

Are concerns over a Greek Euro exit overdone ?
http://www.cnhedge.com/thread-4852-1-1.html

Is the Euro area Credibly on Target?
http://www.cnhedge.com/thread-4838-1-1.html

TheFourthStooge-ing's picture

Is cnhedge just another spammer?

Yes.

 

akak's picture

Does a Chinese bear shit in the woods (and on the roadside too)?

bernorange's picture

"Physical demand from retail investors in the western world has slowed down ..."

How did Goldcore conclude this?  I'm seeing some pretty strong sales volume of gold bullion over the last couple of weeks while tracking Apmex inventory.  Sales of Gold Eagles is picking up again for the month of May.

orangegeek's picture

Two consecutive up days in gold last week.  Prior to this was 2.5 months of downtrend in gold.  With the USD still in a bull trend, not so clear as to how gold will continue up.

 

http://bullandbearmash.com/index/gold/daily/

ZombieHuntclub's picture

Still buying even on mini-dips

P.T.Bull's picture

"Gold's weakness is due to dollar strength." Is this tautology to be taken for analysis?

apberusdisvet's picture

It's all just noise.  Within 3 years I'll be able to buy a great house for 10oz.  The only way out is devaluation.  Coming sooner than you think.  The extend and pretend meme is on life support.

j0nx's picture

Good luck with that 10 oz. meme. If it comes to that then it will be hysteria and anarchy in the streets and your house won't be worth shit with hordes of angry and hungry multi-culuralists banging down your door looking for food or anything else of value.

engineertheeconomy's picture

Thats why we say beans, bullion and BULLETS.

 

akak's picture

Yeah, and that is exactly the same kind of disingenuous fearmongering that bankster shills like Nadler said about $1500 gold back when its price was under $700.

j0nx's picture

Uh huh, we'll see akak. We'll see. Only US fiat collapse would precipitate $20k gold in the short term and US fiat collapse means US government collapse. And US fiat collapse means worldwide collapse which most likely means war on a global scale. Human nature being what it is and all. I don't really think it's fear mongering when you use history as your guide to how people react during given scenarios.

puck's picture

The price of gold always go down so the f.tards like soros can buy enough to triple their holdings in the first quater of the year.

And so shall all of us gold bugs...?