Gold-Price Indicator Fading as ETPs Tumble by $71 Billion – Bloomberg 08-28-14

Salient to Investors:

  • Gold prices and gold ETP holdings have the most-negative correlation since 2004, making the latter less useful as market predictors..  Mark Luschini at Janney Montgomery Scott said the disconnect is because a lot of money has left.
  • Comex open interest fell to a 5-yr low this month and volatility is near a 4-yr low. The CBOE Gold ETF Volatility Index is down 41% in 2014, touching a 15-month low in June.
  • Goldman Sachs said gold will drop to $1,050 in 12 months.
  • Tom Kendall at Credit Suisse said 2014 ETF flows have been much lower than in 2013 as investors focus more on equities, and the perception of systemic financial risk has fallen considerably.
  • Dan Denbow at USAA Precious Metals & Minerals Fund said steady buying of ETFs will translate into supporting prices in the long-term.
  • John Paulson’s SPDR stake has been  unchanged for 4 straight quarters, but still down 68% since 2009. George Soros and Daniel Loeb sold their entire positions in Q2 2013. Barclays forecast a drop of 100 tons from the gold funds in 2014.
  • Sameer Samana at Wells Fargo Advisors said changes in ETF holdings are no longer a factor influencing gold prices. and geopolitical worries are not a permanent concern. Samana said a stronger dollar will push prices down, after which retail investors will start exiting the market again.

Read the full article at http://www.bloomberg.com/news/2014-08-27/gold-price-indicator-fading-as-etps-tumble-by-71-billion.html

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Gold Bearish Outlook Extended as Price Nears $1,200: Commodities – Bloomberg 12-06-13

Salient to Investors:

Investors cut holdings in gold ETPs every month this year, erasing $69.4 billion. Hedge funds et al are the least-bullish since June 2007.

John Paulson told clients last month that he personally would not invest more money in his gold fund. Goldman Sachs forecast prices will drop to $1,110 in 12 months.

Standard Bank said that while gold should be sold into rallies, lower prices make buying the metal more attractive by the day.

BullionVault’s gauge of client buying was at 54 last month, near a 6-month high of 54.3 set in October and the peak of 71.1 in September 2011 when gold reached a record $1,921.15.

Mark O’Byrne at GoldCore said gold looks oversold, and purchases may increase in China ahead of the Lunar New Year festival at the end of January. The World Gold Council said consumer demand in China rose 30 percent in the 12 months through September and is set to overtake India as the world’s biggest user this year.

Gold’s directional-movement indicator shows a bearish trend strengthened over the past month, but its 14-day relative-strength index fell earlier this week to a level suggesting it may be poised to rebound.

Ole Hansen at Saxo Bank said US growth seems to be gathering momentum.

Credit Suisse said the market may be underestimating the probability of a vote to taper this month, and the dollar may have begun a multi-year bull market.

Economists expect US economic growth to accelerate to 2.6 percent in 2014, from 1.7 percent in 2013, helping global expansion to the highest since 2011. Barclays said supply for all six main industrial metals will increase in 2014, resulting in surpluses for copper, nickel and zinc.

Jeremy Baker at Harcourt Investment Consulting said people are still relatively optimistic towards the US economy, while the fundamentals for commodities are actually improving, though concerns linger that there are some supply overhangs in commodities.

Read the full article at http://www.bloomberg.com/news/2013-12-06/gold-bearish-outlook-extended-as-price-nears-1-200-commodities.html

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Investors cut holdings in gold ETPs every month this year, erasing $69.4 billion. Hedge funds et al are the least-bullish since June 2007.

John Paulson told clients last month that he personally would not invest more money in his gold fund. Goldman Sachs forecast prices will drop to $1,110 in 12 months.

Standard Bank said that while gold should be sold into rallies, lower prices make buying the metal more attractive by the day.

BullionVault’s gauge of client buying was at 54 last month, near a 6-month high of 54.3 set in October and the peak of 71.1 in September 2011 when gold reached a record $1,921.15.

Mark O’Byrne at GoldCore said gold looks oversold, and purchases may increase in China ahead of the Lunar New Year festival at the end of January. The World Gold Council said consumer demand in China rose 30 percent in the 12 months through September and is set to overtake India as the world’s biggest user this year.

Gold’s directional-movement indicator shows a bearish trend strengthened over the past month, but its 14-day relative-strength index fell earlier this week to a level suggesting it may be poised to rebound.

Ole Hansen at Saxo Bank said US growth seems to be gathering momentum.

Credit Suisse said the market may be underestimating the probability of a vote to taper this month, and the dollar may have begun a multi-year bull market.

Economists expect US economic growth to accelerate to 2.6 percent in 2014, from 1.7 percent in 2013, helping global expansion to the highest since 2011. Barclays said supply for all six main industrial metals will increase in 2014, resulting in surpluses for copper, nickel and zinc.

Jeremy Baker at Harcourt Investment Consulting said people are still relatively optimistic towards the US economy, while the fundamentals for commodities are actually improving, though concerns linger that there are some supply overhangs in commodities.

Hedge Funds Cut Bullish Gold Bets on Fed Stimulus Outlook – Bloomberg 11-11-13

Salient to Investors:

Barclays and Credit Suisse are predicting lower commodity prices as supplies increase.

Dan Heckman at US Bank Wealth Mgmt said the US economy is showing ample signs of growing, and so the Fed will start looking at tapering by early next year. Heckman is underweight on commodities as the stimulus support will end at a time when supplies are rising and worries about Europe are increasing.”

Goldman Sachs said last month that gold will hold near $1,300 until year-end and then decline to $1,050 at the end of 2014 as an improving US economy prompts less stimulus.

John Paulson said the risk of high inflation remains in the future, triggered by the Fed’s asset purchases.

Jeff Sica at Sica Wealth Mgmt said expectations of long-term inflation, plus risks to growth during Q4 caused by the government shutdown in October may push gold higher, plus long-term buyers will be buying gold as global easy money policy pushes inflation higher.

Suki Cooper et al at Barclay’s said the environment for commodities has deteriorated again after Q3 improvement as supply disruptions dissipate, Chinese economic data softens, and near-month premiums ease in markets including oil – this subdued tone will persist into year-end.

Credit Suisse said the rebound in global industrial production since Q4 2011 is peaking and gold demand from China has peaked for the year.

The Gems & Jewellery Trade Federation said gold purchases in India will fall in this year’s festival season, and sales of coins and bars may decline to as little as 25 percent of the year-earlier total.

Paul Christopher at Wells Fargo Advisors said commodities will struggle to find a balance with supplies rising as demand remains stable and, in some cases, is falling, so recommends investors reduce their long-term allocation to commodities.

Read the full article at http://www.bloomberg.com/news/2013-11-10/hedge-funds-cut-bullish-gold-bets-on-fed-stimulus-outlook.html

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Gold Traders Most Bullish Since March as Paulson Cuts – Bloomberg 08-16-13

Salient to Investors:

The World Gold Council data show that consumer buying of gold rose 53 percent in Q2 from a year earlier, almost making up for the record sales of gold ETPs. The Council sees a dampening of demand in the next few months in India due to restrictions on imports, but says 2014 consumption should be higher than last year in India and in China. The Council said countries added 534.6 tons to reserves in 2012, the most since 1964, and may buy 350 tons in 2013, Turkey’s bullion imports in 2013 through July were 80 percent higher than in all of 2012.

John Paulson, the biggest investor in the SPDR Gold Trust, cut his stake by 53 percent  and George Soros and Daniel Loeb sold their entire SPDR stakes in Q2.

Mark O’Byrne at GoldCore said people buying physical gold are more about having a store of wealth in the medium to long-term whereas the ETP liquidations are more the speculative side, and cites robust physical demand as people see gold as good value at these levels.

Goldman Sachs predicts gold will fall to $1,050 by the end of 2014 as central-bank purchases won’t be enough to prevent further declines.

David Burns at Commerzbank said trading in physical gold is good this year, and interest increased as prices fell, while fabricators are buying and private clients are seeing a second opportunity to enter the market.

Adrian Day at Adrian Day Asset Mgmt predicts gold will rise to $1,600 by year-end because investors overreacted to speculation that the Fed will taper and as governments maintain efforts to boost economic growth.

James Bullard at FRB of St. Louis said policy makers should be careful in changing course based solely on economic forecasts.

Short positions gained ninefold since November and reached a record July 9, while hedge funds et al increased net-long positions by 54 percent from a 6-year low set in June.

65 percent of economists expect the Fed to taper in September.

The IMF predicts global growth of 3.8 percent in 2014, versus 3.1 percent in 2013.

Georgette Boele at ABN Amro said the main reason commodities markets have been improving is better data globally and overall improvement in sentiment, and base metals will be relatively OK in an environment where the economy is improving.

Read the full article at  http://www.bloomberg.com/news/2013-08-16/gold-bulls-return-after-slump-forces-paulson-cut-commodities.html

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Losing Faith in Gold From Ghana to Vancouver Proves Rout – Bloomberg 08-13-13

Salient to Investors:

Gold’s swift fall has ravaged livelihoods around the world, while investors who lost big are shifting assets elsewhere and scaling back retirement plans. The market value of the world’s gold mining companies is down $271 billion since the September 2011 peak of $486 billion. Gold hit $850 on Jan. 21, 1980, or the equivalent of more than $2,400 today after inflation and did not top $850 again until 2008.

Michael Aronstein at Marketfield Asset Mgmt said the giant, decade-long rally will not be repeated, at least in my lifetime.

ABN Amro predicts the price will average $1,000 in 2014 and $840 in 2015 because a stronger US economy will limit gold’s appeal.

Edward Lashinski at RBC Capital Markets said the foundation for gold has eroded, and capital is better deployed in other enterprises that actually see a return.

William Fleckenstein said people own gold because they do not trust the central banks and the price will be much, much higher within 5 years and stocks will crash again. Fleckenstein wrote that the Fed caused repeated asset bubbles with artificially low interest rates.

Seasoned forecasters say gold’s future price is hard to predict because it is driven more by sentiment than standard measures of supply and demand. Gold bulls cite the surge in jewelry buying and 9 consecutive quarters of net buying from central banks. Bears say the banks often buy at the wrong time.

Ronald Wildmann at Basinvest said gold is still a bubble.

Morningstar said 2,273 US-based mutual funds, or 32 percent of the funds it tracks, have an exposure to gold bullion, mining or exploration.

Kevin Telmer at Artisanal Gold Council said the gold boom rippled out to as many as 10 million gold miners and 50 million others who sell them merchandise or services- people switching from farming could expand their earnings as much as fivefold.

In April, Societe Generale declared the end of the gold era. Goldman Sachs predicts $1,050 by the end of 2014.

The median Vancouver mine exploration company has $325,000, enough to last less than 5 months. The largest mining companies argue they can weather gold’s decline by cutting overhead costs, paring exploration and writing down assets acquired during the boom.

Daniele Donahoe at Rinehart Wealth Management said with the advent of ETFs people have been able to become somewhat of their own worst enemy.

John Reade at Paulson & Co. said the long-term trend of increasing demand for gold in lieu of paper is intact.

Bruce Zimmerman at Utimco said gold represents less than 4 percent of assets, encompasses 5 to 6 percent of our thoughts and discussion but generates 99 percent of our publicity. Zimmerman is not selling because, given easing monetary policy, there is a scenario where financial assets essentially become devalued.

Jim Hille at At TCU Endowment prefers oil and gas royalties, which produce income, as gold does nothing for your payout needs every year.

Nick Holland at Gold Fields said the industry is not sustainable at $1,230 an ounce, and we need at least $1,500 an ounce to sustain this industry in any reasonable form.

Read the full article at  http://www.bloomberg.com/news/2013-08-13/losing-faith-in-gold-from-ghana-to-vancouver-proves-rout.html

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Hedge Funds Raise Gold Bets as Goldman Sees Decline: Commodities Bloomberg 07-29-13

Salient to Investors:

Hedge funds et al increased their net-long position in gold futures and options for the 4th consecutive week and the longest streak since October, while more than doubling bets on lower corn prices to a record net-short holding.

Jeffrey Currie et al at Goldman Sachs said gold will decline to $1,050 by the end of 2014 as the US economy improves, prompting less accommodative monetary policy.

Mark Luschini at Janney Montgomery Scott said buyers expect tapering to begin later than many anticipated.

IMF said Russia and Kazakhstan expanded their bullion reserves for a 9th straight month in June, and the World Gold Council said central banks will buy 400 metric tons in 2013, after adding 535 tons in 2012, the most since 1964.

Donald Selkin at National Securities Corp said resistance from people who got caught before will limit further upside and wait to see what the Fed will do.

Mining companies announced at least $15 billion of write-downs in the past 2 months.

John Paulson at PFR Gold Fund said accelerating inflation is a risk reiterated his commitment to buying gold and gold producers as a hedge against currency debasement as central banks pump money into economies.

Goldman pared its 12-month commodity-return forecast to 0.1 percent on July 22: agriculture and precious metals will lead declines.

Net-long positions in crude oil climbed to the highest since the CFTC data begins in June 2006.

Barclays expects copper supplies to exceed demand by 107,000 tons in 2013 and 387,000 tons in 2014.

Corn holdings are the most bearish since data began in 2006. US government forecasts American farmers will harvest record crops.

Jeff Sica at Sica Wealth Mgmt said supplies are high in many commodities amid economic slowdown that is accelerating worldwide.

Read the full article at  http://www.bloomberg.com/news/2013-07-28/hedge-funds-raise-gold-bets-as-goldman-sees-decline-commodities.html

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Fewest Hedge Funds Invest in Gold Since 2010 as Assets Decline – Bloomberg 06-07-13

Salient to Investors:

The number of hedge funds investing in gold is at the lowest level since 2010.

Farhan Mumtaz at EurekaHedge said hedge fund performance declines tied to volatility and withdrawals led either to closures or a shift in strategies – the number of funds investing in gold fell to 290 globally by May versus 310 in December, while assets shrank to $22.2 billion from $32.1 billion.

Credit Suisse forecast last month that gold may drop to $1,100 in a year.

Warren Rogers at Duet Asset Mgmt said people forget that at the end of the day gold is a commodity, and commodities become crowded, run out of steam and fall dramatically.

John Paulson, the top investor in the SPDR Gold Trust, maintained a stake of 21.8 million shares in Q1.

Paul Singer at Elliott Mgmt said gold remains the best store of value in an uncertain global economy, and will rebound as governments have yet to find a solution to reducing the debt they have accumulated.

Ben Davies at Hinde Capital said his fund’s redemptions are being replaced at this level by people who understand gold fundamentals, given the shortage of physical metal in London.

Countries from Brazil to Russia last year added 534.6 tons, the most since 1964, and may buy 450 to 550 tons this year according to the World Gold Council.

Ric Deverell at Credit Suisse said last month that gold will drop as inflation fails to accelerate and risks to the global economy subside. Nouriel Roubini at NYU forecasts a drop toward $1,000 by 2015.

Gabriel Garcin at Europanel Research & Alternative Asset Mgmt said there was an accumulation of very big positions by speculators and people realized that, because of what Draghi has said, the euro will not collapse, the US is doing whatever it can to reduce unemployment, and says if you are buying gold for safe-haven reasons, then you should be selling now.

Read the full article at http://www.bloomberg.com/news/2013-06-06/fewest-hedge-funds-invest-in-gold-since-2010-as-assets-fall-31-.html

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Gold Futures Post Longest Slump Since December 2011 – Bloomberg 05-16-13

Salient to Investors:

George Soros and BlackRock cut stakes in gold ETFs in Q1, signaling waning investment demand.

The World Gold Council said gold ETP demand dropped 13 percent in Q1 from a year earlier and outweighed a surge in purchases of coins, bars and jewelry in China and India.

Frank McGhee at Integrated Brokerage Services continue to see rotation out of precious metals as growth and little inflation eliminate the reasons for the original run-up in gold.

Soros Fund Management cut its stake in the in the SPDR fund by 55 percent in Q4 2012, Paulson & Co. maintained its stake in Q1, and Northern Trust and BlackRock funds had reductions of more than half. Schroder Investment Mgmt bought shares.

Read the full article at http://www.bloomberg.com/news/2013-05-16/gold-near-1-month-low-as-soros-blackrock-reduce-etp-holdings.html

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Soros Joins Gold-Stake Cuts Before Bear Market Drop – Bloomberg 05-16-13

Salient to Investors:

George Soros cut holdings of gold ETPs in Q1, 2013.

John Paulson maintained a stake and Schroder Investment Mgmt bought in Q1.

Deutsche Bank said assets in SPDR will probably drop by an additional 2 million to 4 million ounces after slumping 9.7 million ounces since mid-December.

Jeffrey Currie et al at Goldman Sachs said the selloff has been faster than expected, and a further drop in ETP holdings will probably mean more price declines.

Jim McDonald at Northern Trust said they made one change to their global tactical asset allocation policy this month: eliminating their tactical position in gold.

Robert Kapito at Blackrock said he would still buy gold despite the firm cutting its holdings by half in Q1.

Farallon Capital Mgmt bought put options on SPDR. Whitebox Advisors reduced its holdings 90 percent.

Frances Hudson at Standard Life Investments said the precautionary demand for gold is not there, the attraction is sinking, and the money that exited ETFs has not returned as people are trading up and migrating to equities.

Elliott Mgmt said gold remains the best store of value in an uncertain economy.

EPFR Global said investors pulled a record $21.1 billion from bullion funds in 2013 through May 13.

Warren Buffett wouldn’t be a buyer even at $800 because it just sits there, and you hope somebody pays you more for it.

Read the full article at http://www.bloomberg.com/news/2013-05-16/soros-leads-gold-stake-cuts-before-bear-market-drop.html

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Paulson Sold Gold Miners, Bought Family Dollar in Quarter – Bloomberg 05-15-13

Salient to Investors:

John Paulson lowered stakes in gold miners in Q1 and added shares of companies that stand to benefit from a stronger economy.

Paulson has done well investing in companies undergoing mergers or restructurings, but his big bets in the past 2 years on macroeconomic developments have undermined that performance.

Paulson & Co said gold is taking a pause in a long-term upward trend, and continued global central bank printing will drive demand for gold as an alternative currency to paper currencies.

Read the full article at http://www.bloomberg.com/news/2013-05-16/paulson-sold-gold-miners-bought-family-dollar-in-quarter.html

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