This morning, like many other mornings in the last few months, precious metals prices are being pummeled lower in a vertical dumpfest (for no apparent sudden reason other than its opening time). What is ironic about this apparent lack of demand is that around the world, demand is extreme - and is most clearly evident in India, where thanks to government intervention, physical premiums push to new record highs yet do nothing to detract from Indians buying demand (as Reuters reports supplies of the precious metal disappear). Of course, the real reason why gold and silver prices have dropped since 10/28 is that none other than "the world renowned Gartman" went long again...
Via Michael Krieger of Liberty Blitzkrieg blog [9],
I first reported on record high gold premiums in India [10] a couple of weeks ago. Since then, the story has become even more interesting as Reuters reports that gold supplies have completely dried up just ahead of major gold buying festivals and despite continued record premiums. While it is clear that Indians are finding a way to buy gold anyway via black markets [11], this is still a very interesting story to keep an eye on.
More from Reuters:
India has imposed several restrictions on imports of gold, the biggest non-essential import item, to curb a record trade deficit. Gold imports in September fell to 7 tonnes from 162 tonnes in May.
Of course, if additional demand wasn’t being met via black markets the price of gold would be far lower than it is.
“Still gold is not available, and they are charging $120-130 (an ounce) of premiums,” said Bachhraj Bamalwa, director with the All India Gems and Jewellery Trade Federation.
Most of the demand is being met by recycled gold or through unofficial or illegal supply channels, traders said.
“Sales have dropped by 50 percent… and everything is happening according to the wishes of the government,” said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House.
I’m sure this will all work out just as the government anticipates…
Full article here [12].
As for the supposed reason for today's plunge:
[13]
In what has become a neck-to-neck race between the two best contrarian indicators in the world, Goldman's FX antiguru Tom Stolper and, well, nobody's Dennis Gartman, recall that it was October 15 when Gartman infamously told CNBC that "Gold Is Acting Crappy... Looks Weak... Looks Awful." [14] The logical result was a $100 gold price ramp in the few short days that followed. So fast forward two weeks to October 28 when Gartman, again on CNBC [15], intoned his suddenly bullish stance on gold, telling CNBC " that he was now looking at another trade. " That prompted us to quickly note that logical trade to be made was...
Gartman now long gold apparently. Time to sell it all
— zerohedge (@zerohedge) October 28, 2013 [16]
And sure enough, after hitting $1360 on the day of Gartman's interview, gold has since tumbled.
Needless to say, we would urge readers to wait for the author of the "world renowned Gartman letter" to start bashing gold again before going all in the yellow metal.