By Pham-Duy Nguyen
http://www.bloomberg.com/apps/news?pid=20601081&sid=aDyZ2gge5vg0&refer=australia
March 11 (Bloomberg) -- Gold futures rose, rebounding from the lowest price in a month, as the slumping dollar enhanced the appeal of the precious metal as an alternative investment. Silver gained the most in two weeks.
The dollar fell as much as 1.2 percent against a weighted basket of six major currencies. Gold and the dollar historically have moved in the opposite direction. The correlation hasn’t held this year as investors purchased both assets as a hedge against turmoil in financial markets.
“Gold is still an exceptional buy,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Traders will start looking at more traditional relationships like future inflation, government spending and devaluing of currencies.”
Gold futures for April delivery rose $14.80, or 1.7 percent, to $910.70 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday, the price touched $891.10, the lowest since Feb. 3.
Silver futures for May delivery gained 26 cents, or 2.1 percent, to $12.80 an ounce, the biggest gain since Feb. 20. Gold has gained 3 percent in 2009, while silver is up 13 percent.
Gold reached a record $1,033.90 on March 17 as the dollar headed for an all-time low against the euro. In the second half of 2008, the dollar rallied as investors sought a haven from declining equity markets. Gold gained 5.5 percent last year, while the dollar rose 6 percent against the basket of currencies.
Gold’s gains accelerated today after U.S. equities pared gains. The Standard & Poor’s 500 Index climbed as much as 1.7 percent before dropping. Yesterday, the gauge jumped 6.4 percent, the most this year. Gold fell as low as $892.60 today.
A rebound in equities would “be a bearish development as investment transfers from gold toward riskier assets,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
Since March 6, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has been unchanged at 1,029 metric tons, close to the all-time high.
“It’s becoming evident that the buying in ETFs may have been led by a small group of hedge funds, whose actions can be incredibly difficult to predict,” Pawlicki said. “It’s also likely that they are now under water on those positions.”
Greenlight Capital Inc., the $5.1 billion hedge fund run by David Einhorn, said last month it invested in gold for the first time in the fourth quarter, making a bullion-backed exchange- traded fund its largest holding.
Showing posts with label GLD. Show all posts
Showing posts with label GLD. Show all posts
Wednesday, March 11, 2009
Monday, March 9, 2009
Gold slides more than 2 percent as dollar rises
Mon Mar 9, 2009 1:00pm EDT
By Jan Harvey
LONDON (Reuters) - Gold prices slipped more than 2 percent on Monday after the dollar rose and data showed a small fall in holdings of exchange traded funds.
Spot gold fell to a low of $913.53 an ounce and was at $916.60/917.60 an ounce at 1629 GMT from $939.60 late in New York on Friday.
"Right now the dollar is a little bit stronger and equity markets (generally) are a bit stronger as well so we don't see much inflows into gold exchange traded funds (ETFs)," said Commerzbank analyst Eugen Weinberg.
The world's largest gold-backed exchange traded fund (ETF) recorded its first decline since January 8. Its holdings dipped 0.3 tonnes to 1,028.99 tonnes as of March 8.
UBS analyst John Reade said the total gold holdings of the nine major ETFs the bank follows fell to 48.30 million ounces on March 6 from a revised total of 48.40 million ounces previously.
The dollar gained across the board as global recession fears and banking sector concerns weighed on world stock markets, spurring safe-haven demand for the greenback.
A higher U.S. currency makes metals priced in dollars more expensive for holders of other currencies. Gold is often also used as an alternative when the dollar falls out of favor.
Earlier a rise in U.S. stocks also weighed on gold, which is used a hedge against financial market instability. .N
SOLID ETF DEMAND
Equity weakness broadly supported gold toward the end of last week, although the precious metal was caught up in a stocks sell-off last Monday as investors sought liquidity.
Demand for the precious metal from ETFs, which issue securities backed by physical stocks of gold, was a major price driver earlier in the year. Taders said expected these inflows to resume as uncertainty grows.
"I think that there will be enough worrying news in the first half of 2009 for ETF demand to remain solid," said David Thurtell, an analyst at Citigroup.
Holdings of Julius Baer's (BAER.VX) gold-backed exchange traded fund rose 109,000 ounces or 18 percent last week, the bank said in a weekly statement on Monday.
Demand for gold from jewelry buyers in traditionally strong markets such as India and China remained weak, however.
Traders said scrap sales also put pressure on premiums for gold bars.
By Jan Harvey
LONDON (Reuters) - Gold prices slipped more than 2 percent on Monday after the dollar rose and data showed a small fall in holdings of exchange traded funds.
Spot gold fell to a low of $913.53 an ounce and was at $916.60/917.60 an ounce at 1629 GMT from $939.60 late in New York on Friday.
"Right now the dollar is a little bit stronger and equity markets (generally) are a bit stronger as well so we don't see much inflows into gold exchange traded funds (ETFs)," said Commerzbank analyst Eugen Weinberg.
The world's largest gold-backed exchange traded fund (ETF) recorded its first decline since January 8. Its holdings dipped 0.3 tonnes to 1,028.99 tonnes as of March 8.
UBS analyst John Reade said the total gold holdings of the nine major ETFs the bank follows fell to 48.30 million ounces on March 6 from a revised total of 48.40 million ounces previously.
The dollar gained across the board as global recession fears and banking sector concerns weighed on world stock markets, spurring safe-haven demand for the greenback.
A higher U.S. currency makes metals priced in dollars more expensive for holders of other currencies. Gold is often also used as an alternative when the dollar falls out of favor.
Earlier a rise in U.S. stocks also weighed on gold, which is used a hedge against financial market instability. .N
SOLID ETF DEMAND
Equity weakness broadly supported gold toward the end of last week, although the precious metal was caught up in a stocks sell-off last Monday as investors sought liquidity.
Demand for the precious metal from ETFs, which issue securities backed by physical stocks of gold, was a major price driver earlier in the year. Taders said expected these inflows to resume as uncertainty grows.
"I think that there will be enough worrying news in the first half of 2009 for ETF demand to remain solid," said David Thurtell, an analyst at Citigroup.
Holdings of Julius Baer's (BAER.VX) gold-backed exchange traded fund rose 109,000 ounces or 18 percent last week, the bank said in a weekly statement on Monday.
Demand for gold from jewelry buyers in traditionally strong markets such as India and China remained weak, however.
Traders said scrap sales also put pressure on premiums for gold bars.
Gold: Weak jewelry demand, strong dollar hit prices
Weak jewelry demand, strong dollar hit prices
SPDR gold ETF records first outflow since early January
Julius Baer's gold ETF up 18 percent last week (Recasts, updates prices, market activity; adds second byline, dateline, previously LONDON)
By Frank Tang and Jan Harvey
http://www.guardian.co.uk/business/feedarticle/8394276
NEW YORK/LONDON, March 9 (Reuters) - Gold prices dropped more than 2 percent on Monday, as a dollar rise and slight drop of holdings of gold-backed exchange traded funds triggered heavy sell-stop orders.
Higher gold prices and global recession weighed down gold jewelry buying, which accounts for about 60 percent of total gold demand, traders said. "There is a big bull-and-bear disparity in gold. There is investment buying but no jewelry buying, which has dropped sharply," said Jonathan Jossen, a COMEX gold floor trader.
Spot gold fell to a low of $911.95 an ounce and was at $918.15 an ounce at 1:22 p.m. EDT (1722 GMT), down 2.3 percent from its last quote $939.60 in New York late Friday.
Gold for April delivery settled down $24.70, or 2.6 percent, at $918.00 an ounce on the COMEX division of the New York Mercantile Exchange. Demand for gold from jewelry buyers in traditionally strong markets remained weak.
On Monday, the dollar rose amid global recession fears and banking sector concerns, prompting investors to divert money out of gold and into U.S. Treasuries. A stronger dollar makes metals more expensive for holders of other currencies. Gold often rises when the dollar falls.
The world's largest gold-backed exchange traded fund (ETF) recorded its first decline since Jan. 8. Its holdings dipped 0.3 tonnes to 1,028.99 tonnes as of March 8.
Investors also favored oil at the expense of gold on Monday. Oil rallied 4 percent at above $47 per barrel. "A lot of people think gold is much too high compared to where crude is, so they are taking profit," Jossen said.
SOLID ETF DEMAND
Demand for gold from ETFs, which issue securities backed by physical stocks of gold, helped drive bullion higher earlier in the year. Traders said they expected these inflows to resume. "I think that there will be enough worrying news in the first half of 2009 for ETF demand to remain solid," said David Thurtell, an analyst at Citigroup. Holdings of Julius Baer's gold-backed exchange traded fund rose 109,000 ounces or 18 percent last week, the bank said in a weekly statement on Monday.
(Additional reporting by Paul Lauener and Pratima Desai; Editing by David Gregorio)
SPDR gold ETF records first outflow since early January
Julius Baer's gold ETF up 18 percent last week (Recasts, updates prices, market activity; adds second byline, dateline, previously LONDON)
By Frank Tang and Jan Harvey
http://www.guardian.co.uk/business/feedarticle/8394276
NEW YORK/LONDON, March 9 (Reuters) - Gold prices dropped more than 2 percent on Monday, as a dollar rise and slight drop of holdings of gold-backed exchange traded funds triggered heavy sell-stop orders.
Higher gold prices and global recession weighed down gold jewelry buying, which accounts for about 60 percent of total gold demand, traders said. "There is a big bull-and-bear disparity in gold. There is investment buying but no jewelry buying, which has dropped sharply," said Jonathan Jossen, a COMEX gold floor trader.
Spot gold fell to a low of $911.95 an ounce and was at $918.15 an ounce at 1:22 p.m. EDT (1722 GMT), down 2.3 percent from its last quote $939.60 in New York late Friday.
Gold for April delivery settled down $24.70, or 2.6 percent, at $918.00 an ounce on the COMEX division of the New York Mercantile Exchange. Demand for gold from jewelry buyers in traditionally strong markets remained weak.
On Monday, the dollar rose amid global recession fears and banking sector concerns, prompting investors to divert money out of gold and into U.S. Treasuries. A stronger dollar makes metals more expensive for holders of other currencies. Gold often rises when the dollar falls.
The world's largest gold-backed exchange traded fund (ETF) recorded its first decline since Jan. 8. Its holdings dipped 0.3 tonnes to 1,028.99 tonnes as of March 8.
Investors also favored oil at the expense of gold on Monday. Oil rallied 4 percent at above $47 per barrel. "A lot of people think gold is much too high compared to where crude is, so they are taking profit," Jossen said.
SOLID ETF DEMAND
Demand for gold from ETFs, which issue securities backed by physical stocks of gold, helped drive bullion higher earlier in the year. Traders said they expected these inflows to resume. "I think that there will be enough worrying news in the first half of 2009 for ETF demand to remain solid," said David Thurtell, an analyst at Citigroup. Holdings of Julius Baer's gold-backed exchange traded fund rose 109,000 ounces or 18 percent last week, the bank said in a weekly statement on Monday.
(Additional reporting by Paul Lauener and Pratima Desai; Editing by David Gregorio)
Friday, March 6, 2009
Bear Hug for Gold?
http://www.minyanville.com/articles/gold-rally-GLD-market-etf-statistics/index/a/21496/from/yahoo
Lance Lewis Mar 06, 2009 2:50 pm
I’ve read some things written by gold bears of late, calling for gold to decline in March due to “seasonal tendencies."
As always with statistics, if one doesn’t know why a particular statistical pattern occurs (as with the “Super Bowl Indicator” for example), one can make incorrect assumptions about future behavior.
In gold’s case, it’s typical seasonality tends to see gold rally in the fall, and then peak in the early spring. But the reason that we typically see this pattern, is due to the seasonality of gold demand coming from the largest gold jewelry consumer on the planet, whose various festivals revolve around gold: India.
However, as I’ve pointed out before, jewelry demand is not what is currently driving the gold price. Indian gold imports in February were virtually 0. Meanwhile, gold rallied $100 during February to $1000 and an 11-month high. As always occurs during a big bull market in gold, investment demand is the primary driver of the gold market, and it displaces jewelry demand. And investment demand is obviously not seasonal.
Lance Lewis Mar 06, 2009 2:50 pm
I’ve read some things written by gold bears of late, calling for gold to decline in March due to “seasonal tendencies."
As always with statistics, if one doesn’t know why a particular statistical pattern occurs (as with the “Super Bowl Indicator” for example), one can make incorrect assumptions about future behavior.
In gold’s case, it’s typical seasonality tends to see gold rally in the fall, and then peak in the early spring. But the reason that we typically see this pattern, is due to the seasonality of gold demand coming from the largest gold jewelry consumer on the planet, whose various festivals revolve around gold: India.
However, as I’ve pointed out before, jewelry demand is not what is currently driving the gold price. Indian gold imports in February were virtually 0. Meanwhile, gold rallied $100 during February to $1000 and an 11-month high. As always occurs during a big bull market in gold, investment demand is the primary driver of the gold market, and it displaces jewelry demand. And investment demand is obviously not seasonal.
Wednesday, March 4, 2009
Gold Pullback Doesn't Inflict Meaningful Technical Damage
Tue, Mar 3 2009, 05:23 GMT
by Mike Paulenoff
MPTrader.com
No, the gold and SPDR Gold Trust ETF (NYSE: GLD) markets have not provided much in any sort of hedge in the past week or so. However, looked at from a relative strength perspective, the enclosed chart pattern of the GLD clearly remains the inverse of the major equity market ETFs. Let's notice that the GLD has pulled back about 7% from its Feb 20th high, but has not inflicted any damage to the underlying chart structure. In fact, the GLD has pulled back to its mid-Feb upside break point, in the vicinity of 90.00-91.00, which thus far has contained the selling pressure. From a near-term perspective, the GLD will have to press and sustain beneath 87.50 to begin to inflict meaningful damage to the enclosed uptrend (channel) pattern. Although my near-term work leaves open a press into the 90.00 area from here, my intermediate-term pattern work indicates that thereafter the GLD should embark on another upleg that hurdles 98.99 on the way to new highs above 100.44.
http://www.fxstreet.com/technical/market-view/the-midday-minute/2009-03-03.html
by Mike Paulenoff
MPTrader.com
No, the gold and SPDR Gold Trust ETF (NYSE: GLD) markets have not provided much in any sort of hedge in the past week or so. However, looked at from a relative strength perspective, the enclosed chart pattern of the GLD clearly remains the inverse of the major equity market ETFs. Let's notice that the GLD has pulled back about 7% from its Feb 20th high, but has not inflicted any damage to the underlying chart structure. In fact, the GLD has pulled back to its mid-Feb upside break point, in the vicinity of 90.00-91.00, which thus far has contained the selling pressure. From a near-term perspective, the GLD will have to press and sustain beneath 87.50 to begin to inflict meaningful damage to the enclosed uptrend (channel) pattern. Although my near-term work leaves open a press into the 90.00 area from here, my intermediate-term pattern work indicates that thereafter the GLD should embark on another upleg that hurdles 98.99 on the way to new highs above 100.44.
http://www.fxstreet.com/technical/market-view/the-midday-minute/2009-03-03.html
Tuesday, March 3, 2009
Fool’s Gold
http://247wallst.com/2009/03/02/fools-gold/
Posted: March 2, 2009 at 6:15 am
Gold has traditionally served as a safe haven for investors in times of economic turmoil or as a store of value during inflationary periods. The Economist recently argued that now is the time to invest in gold. The basic argument is that gold will perform well regardless of how well monetary policy achieves its goal of turning the economy around.
If slashing interest rates has the desired effect, the U.S. economy will likely enter into an inflationary period. This should spur a rally in gold as investors seek a hedge against the effects of inflation. If low interest rates fail to turn the economy around, gold should continue to benefit from the fear-driven buying that has driven it to its current level of around $950 an ounce.
The effect of economic deterioration on gold is evident in the way that it has traded since the first of the year. The average monthly trading volume for SPDR Gold Trust (GLD) is up over 200% since the beginning of the year. Its safe to say that if gloomy economic news continues to emerge gold prices will at least hold up.
However, the argument that increased inflation will be similarly bullish for gold is off the mark. A good deal of the upward pressure on gold prices has been speculative trading. If low interest rates are successful they will bring back more than inflation.
Barring a Carter-era anomaly, inflation will be a function of a recovering economy. When the economy reaches this point speculators will be looking for opportunities in assets that did not experience a run-up while the recession was still in progress. Economic recovery may pose the greatest risk to gold investors.
Posted: March 2, 2009 at 6:15 am
Gold has traditionally served as a safe haven for investors in times of economic turmoil or as a store of value during inflationary periods. The Economist recently argued that now is the time to invest in gold. The basic argument is that gold will perform well regardless of how well monetary policy achieves its goal of turning the economy around.
If slashing interest rates has the desired effect, the U.S. economy will likely enter into an inflationary period. This should spur a rally in gold as investors seek a hedge against the effects of inflation. If low interest rates fail to turn the economy around, gold should continue to benefit from the fear-driven buying that has driven it to its current level of around $950 an ounce.
The effect of economic deterioration on gold is evident in the way that it has traded since the first of the year. The average monthly trading volume for SPDR Gold Trust (GLD) is up over 200% since the beginning of the year. Its safe to say that if gloomy economic news continues to emerge gold prices will at least hold up.
However, the argument that increased inflation will be similarly bullish for gold is off the mark. A good deal of the upward pressure on gold prices has been speculative trading. If low interest rates are successful they will bring back more than inflation.
Barring a Carter-era anomaly, inflation will be a function of a recovering economy. When the economy reaches this point speculators will be looking for opportunities in assets that did not experience a run-up while the recession was still in progress. Economic recovery may pose the greatest risk to gold investors.
Monday, March 2, 2009
Still Looking for Gold Bottom
Posted by Ryno On March - 2 - 2009 10:02 pm
http://www.pick24.com/wp/?p=731
Yesterday, I posed the question of whether or not gold had hit a temporary bottom and was positioned to move back up. Well, it definitely wasn’t ready to move back up today. GLD is still in a free fall with fewer and few buyers coming to the table.
My GLD pullback target is now $87 - $88ish
http://www.pick24.com/wp/?p=731
Yesterday, I posed the question of whether or not gold had hit a temporary bottom and was positioned to move back up. Well, it definitely wasn’t ready to move back up today. GLD is still in a free fall with fewer and few buyers coming to the table.
My GLD pullback target is now $87 - $88ish
Saturday, February 28, 2009
Gold Stock Pressure, With Or Without Gold Prices
Gold Stock Pressure, With Or Without Gold Prices (EGO, RGLD, IAG, GSS, GLD, GDX, ABX)
Posted: February 27, 2009 at 9:03 am
http://247wallst.com/2009/02/27/gold-stock-pressure-with-or-without-gold-prices-ego-rgld-iag-gss-gld-gdx-abx/
We covered last weekend about how the $1,000.00 gold was at an inflection point and looking as though it was either poised to pop to $1,200.00 on the speculation of fear or that it was likely to fall back towards $800.00 as reality prevails as the world didn’t flatten and proceed to roll off the edge into the abyss. What is interesting is that even as gold was hitting highs, many of the miners, particularly the speculative miners, were well under highs and have seen even worse pressure this week on gold’s pullback.
When Eldorado Gold Corporation (AMEX:EGO) withdrew its planned offering of common stock on Tuesday, its shares and those of competitor miners fell sharply. Eldorado opened the day at $9.34 and closed it at $8.19, off more than 12%. Royal Gold Corporation (NASDAQ:RGLD) fell from $44.85 to $41.22, down about 8%; IAMGold dropped from $8.74 to close at $7.66, down more than 12%; and Gold Star Resources, Ltd. (NYSE:GSS) dropped from $1.40 to $1.16, off about 17%.
Two gold ETFs, SPDR Gold Shares (NYSE:GLD) and Market Vectors Gold Miners (NYSE:GDX) both fell sharply as well, but both have recovered some as of yesterday’s close. Gold Shares invests in bullion and Gold Miners invests in mining stocks. Gold Shares is down about 5% as of yesterday’s close, while Gold Miners is down about 9%.
Miners, especially the smaller ones like Eldorado and Royal Gold, will continue to struggle with liquidity as the economy remains sour. Mining ETFs like Market Vectors Gold Miners will follow along because the large gold miners like Barrick Gold Corporation (NYSE:ABX) included in the fund are also struggling to lower costs and increase production.
Gold bullion investors, like SPDR Gold Shares, will follow the economic news. Bullion fell sharply yesterday to close just above $940/ounce, down from about $945/ounce the previous day. European and Asian markets are lower today, so gold has recovered a bit to about $958/ounce. When inflation fears rise, bullion rises sharply, as it did last week, when it closed above $1,000/ounce.
Paul Ausick
February 27, 2009
Posted: February 27, 2009 at 9:03 am
http://247wallst.com/2009/02/27/gold-stock-pressure-with-or-without-gold-prices-ego-rgld-iag-gss-gld-gdx-abx/
We covered last weekend about how the $1,000.00 gold was at an inflection point and looking as though it was either poised to pop to $1,200.00 on the speculation of fear or that it was likely to fall back towards $800.00 as reality prevails as the world didn’t flatten and proceed to roll off the edge into the abyss. What is interesting is that even as gold was hitting highs, many of the miners, particularly the speculative miners, were well under highs and have seen even worse pressure this week on gold’s pullback.
When Eldorado Gold Corporation (AMEX:EGO) withdrew its planned offering of common stock on Tuesday, its shares and those of competitor miners fell sharply. Eldorado opened the day at $9.34 and closed it at $8.19, off more than 12%. Royal Gold Corporation (NASDAQ:RGLD) fell from $44.85 to $41.22, down about 8%; IAMGold dropped from $8.74 to close at $7.66, down more than 12%; and Gold Star Resources, Ltd. (NYSE:GSS) dropped from $1.40 to $1.16, off about 17%.
Two gold ETFs, SPDR Gold Shares (NYSE:GLD) and Market Vectors Gold Miners (NYSE:GDX) both fell sharply as well, but both have recovered some as of yesterday’s close. Gold Shares invests in bullion and Gold Miners invests in mining stocks. Gold Shares is down about 5% as of yesterday’s close, while Gold Miners is down about 9%.
Miners, especially the smaller ones like Eldorado and Royal Gold, will continue to struggle with liquidity as the economy remains sour. Mining ETFs like Market Vectors Gold Miners will follow along because the large gold miners like Barrick Gold Corporation (NYSE:ABX) included in the fund are also struggling to lower costs and increase production.
Gold bullion investors, like SPDR Gold Shares, will follow the economic news. Bullion fell sharply yesterday to close just above $940/ounce, down from about $945/ounce the previous day. European and Asian markets are lower today, so gold has recovered a bit to about $958/ounce. When inflation fears rise, bullion rises sharply, as it did last week, when it closed above $1,000/ounce.
Paul Ausick
February 27, 2009
Saturday, February 21, 2009
$800 or $1,200 Gold, Panic Vs. Inflation
$800 or $1,200 Gold, Panic Vs. Inflation, ETF’s (GLD, UGL, DZZ, DGP, DGZ, GDX)
Posted: February 21, 2009 at 8:43 am
http://247wallst.com/2009/02/21/800-or-1200-gold-panic-vs-inflation-etfs-gld-ugl-dzz-dgp-dgz-gdx/
We have probably covered more gold stocks over the last couple of months than we care to recall, but we have been getting more and more inquiries on the ETF’s and on how to play the shiny yellow stuff directly. When we see the media covering any topic with this frenzy and traders getting more and more interested, history and calm dictate that an inflection point has been reached. Following this inflection point is almost certainly what will be a sharp move in either direction. Gold breached the $1,000.00 threshold Friday as panic set further and further in, so in theory we could either be at $1,200.00 or $800.00 with a near-equal probability in just a few months.
For starters, let’s go ahead and get the “why do you think $1,200.00 or $800.00 is imminent?” question addressed. Every time you see major inflections like this, there is either the panic buying or the crescendo selling. Oil is the best and most recent example of this. When oil was trading north of $90.00 for the first time and everyone was scared of $100.00 oil, it became a chasing game and a game based upon speculation rather than a game based upon reality. We had many traders calling for $120.00 and we had many oil companies saying that anything north of $75.00 did not make sense to them. So use the $100.00.00 level as the key pivot. It turned out that both the traders and the oil companies were right. It also turned out that they were both wrong. Oil went to twice what many of those oil companies thought was a peak intrinsic value. And in just six months or so it was back to half of that same “intrinsic value” of $75.00.
Gold may be a perfect hedge against inflation. But what you are witnessing today is that gold is also a pure hedge against fear. There is fear of nationalizing some of the major banks. There is a fear that the DJIA could go to 6,000 and the S&P 500 could go to under 700.00. There is a fear that unemployment will hit double-digit levels. And there is a fear that our massive and nasty recession is going to be the modern day version of the 1930’s. These are currently all real fears, and this has not yet happened. A year ago the DJIA was north of 12,000 and the S&P 500 was north of 1,300.00. The closing levels yesterday were 7,365.67 on the DJIA and the S&P 500 closed at 770.05.
Yesteryear’s $1,000.00 gold was inflation related trading. Today’s $1,000.00 gold is the hedge of fear. Again, we are merely saying that this $1,000.00 mark is an inflection point. The cases for $800.00 or $1,200.00 are equally as easy to make. OK, so you got the history lesson and you have the most basic explanation for why gold is where it is.
But there is another issue affecting the price of gold today. Exchange traded funds and exchange traded notes. Investors and traders are buying the hell out of these. These ETF’s and ETN’s have to in turn go into the spot market and futures markets and buy the shiny yellow stuff. We have seen some figures showing that there could be as much as $100.00 or $200.00 extra in the price of gold because of the ETF’s and ETN’s buying it up. That number is probably impossible to give with any certainty, and you have to always use the notion that things are worth what the market is willing to pay for them. So whether gold is overvalued or undervalued, the value IS almost $1,000.00 today. This is also happening at a time when the banks and hedge funds that would have been buying can only do it with minimal leverage rather than the massive leverage used just a year ago.
SPDR Gold Shares (NYSE: GLD) is the mother load of all gold ETF’s. It tracks the performance of the price of gold bullion, less the trust expenses of course. It holds gold and is expected to issue baskets in exchange for deposits of gold. For fair measure, you can usually take the ratio at one-tenth to see where the price of spot gold happens to be. There are then the trust fees and the discrepancy of time and whichever direction the wind blows that factor in on its actual pricing. This closed at $97.80 Friday vs. $993.20 in spot gold. Again, not a perfect 1:10 ratio, but close enough. There are also large discrepancies in the actual market cap: Yahoo Finance shows $24.93 billion as this ETF market cap, and Google Finance shows $27.47 billion. The SPDR site itself shows a market cap of $24.891 billion. This one is massive regardless. To show how much of a bogey it is, it trades over 16 million shares on an average day, but it traded over 43 million shares Friday and on February 11 it traded some 55 million shares. On two different days in September its volume was north of 60 million shares.
Then there is the schizophrenic gold ETF that is supposed to employ TWO-TIMES leverage on gold. The Ultra Gold ProShares (NYSE: UGL) seeks to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The difference here between this is that it has to use “financial instruments”… swap agreements, forward contracts, and futures and options contracts. So besides the fact that it aims for twice the performance, it has an extra measure of added volatility in its trading. ProShares lists its net asset value premium and discount as having been roughly -2.0% to as high as +6.0%. It noted Friday’s level was a premium of $0.44. It trades over 200,000 shares per day, but it traded over 664,000 yesterday and it saw some 882,600 shares trade hands on FEB 17. As gold is on highs, this one is too.
There are also two ETN’s which essentially offset each other. PowerShares employs more DOUBLE-LEVERAGE ETN’s. The PowerShares DB Gold Double Short ETN (NYSE: DZZ) and the PowerShares DB Gold Double Long ETN (NYSE: DGP) are the leveraged instruments. The PowerShares DB Gold Short ETN (NYSE: DGZ) is just the inverse, just… The average volume on these can be lower as well. “DZZ” traded over 1.6 million shares Friday, more than double its normal volume. “DGP” traded over 4.2 million shares Friday, almost twice its normal volume. DGZ traded over 38,000 shares Friday, about 150% of normal volume.
One gold ETF that is not keeping up with the shiny yellow stuff is the Market Vectors Gold Miners ETF (NYSE: GDX). While it closed up almost 4% at $37.03 Friday, its 52-week trading range is $15.83 to $56.87. This one tracks the Gold Miners Index in proportion to the company weighting in the index, so it invests in the common stocks of global gold miners which are not all US-based companies. Our most recent data shows that Barrick Gold, Goldcorp, and Newmont account for almost 35% of the entire ETF. Its 25 top holdings also account for about 97.8% of the entire ETF. It trades an average of over 8.5 million shares, and it saw over 19.5 million shares trade hands Friday.
We are not going to give trade set-ups here for how you can bet on $1,200.00 or $800.00 gold. That will either be done tomorrow or in our newsletters. And early this week we’ll show you how and why many of the more speculative gold stocks have not been tracking the price of the shiny yellow stuff.
JON C. OGG
February 21, 2009
Posted: February 21, 2009 at 8:43 am
http://247wallst.com/2009/02/21/800-or-1200-gold-panic-vs-inflation-etfs-gld-ugl-dzz-dgp-dgz-gdx/
We have probably covered more gold stocks over the last couple of months than we care to recall, but we have been getting more and more inquiries on the ETF’s and on how to play the shiny yellow stuff directly. When we see the media covering any topic with this frenzy and traders getting more and more interested, history and calm dictate that an inflection point has been reached. Following this inflection point is almost certainly what will be a sharp move in either direction. Gold breached the $1,000.00 threshold Friday as panic set further and further in, so in theory we could either be at $1,200.00 or $800.00 with a near-equal probability in just a few months.
For starters, let’s go ahead and get the “why do you think $1,200.00 or $800.00 is imminent?” question addressed. Every time you see major inflections like this, there is either the panic buying or the crescendo selling. Oil is the best and most recent example of this. When oil was trading north of $90.00 for the first time and everyone was scared of $100.00 oil, it became a chasing game and a game based upon speculation rather than a game based upon reality. We had many traders calling for $120.00 and we had many oil companies saying that anything north of $75.00 did not make sense to them. So use the $100.00.00 level as the key pivot. It turned out that both the traders and the oil companies were right. It also turned out that they were both wrong. Oil went to twice what many of those oil companies thought was a peak intrinsic value. And in just six months or so it was back to half of that same “intrinsic value” of $75.00.
Gold may be a perfect hedge against inflation. But what you are witnessing today is that gold is also a pure hedge against fear. There is fear of nationalizing some of the major banks. There is a fear that the DJIA could go to 6,000 and the S&P 500 could go to under 700.00. There is a fear that unemployment will hit double-digit levels. And there is a fear that our massive and nasty recession is going to be the modern day version of the 1930’s. These are currently all real fears, and this has not yet happened. A year ago the DJIA was north of 12,000 and the S&P 500 was north of 1,300.00. The closing levels yesterday were 7,365.67 on the DJIA and the S&P 500 closed at 770.05.
Yesteryear’s $1,000.00 gold was inflation related trading. Today’s $1,000.00 gold is the hedge of fear. Again, we are merely saying that this $1,000.00 mark is an inflection point. The cases for $800.00 or $1,200.00 are equally as easy to make. OK, so you got the history lesson and you have the most basic explanation for why gold is where it is.
But there is another issue affecting the price of gold today. Exchange traded funds and exchange traded notes. Investors and traders are buying the hell out of these. These ETF’s and ETN’s have to in turn go into the spot market and futures markets and buy the shiny yellow stuff. We have seen some figures showing that there could be as much as $100.00 or $200.00 extra in the price of gold because of the ETF’s and ETN’s buying it up. That number is probably impossible to give with any certainty, and you have to always use the notion that things are worth what the market is willing to pay for them. So whether gold is overvalued or undervalued, the value IS almost $1,000.00 today. This is also happening at a time when the banks and hedge funds that would have been buying can only do it with minimal leverage rather than the massive leverage used just a year ago.
SPDR Gold Shares (NYSE: GLD) is the mother load of all gold ETF’s. It tracks the performance of the price of gold bullion, less the trust expenses of course. It holds gold and is expected to issue baskets in exchange for deposits of gold. For fair measure, you can usually take the ratio at one-tenth to see where the price of spot gold happens to be. There are then the trust fees and the discrepancy of time and whichever direction the wind blows that factor in on its actual pricing. This closed at $97.80 Friday vs. $993.20 in spot gold. Again, not a perfect 1:10 ratio, but close enough. There are also large discrepancies in the actual market cap: Yahoo Finance shows $24.93 billion as this ETF market cap, and Google Finance shows $27.47 billion. The SPDR site itself shows a market cap of $24.891 billion. This one is massive regardless. To show how much of a bogey it is, it trades over 16 million shares on an average day, but it traded over 43 million shares Friday and on February 11 it traded some 55 million shares. On two different days in September its volume was north of 60 million shares.
Then there is the schizophrenic gold ETF that is supposed to employ TWO-TIMES leverage on gold. The Ultra Gold ProShares (NYSE: UGL) seeks to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The difference here between this is that it has to use “financial instruments”… swap agreements, forward contracts, and futures and options contracts. So besides the fact that it aims for twice the performance, it has an extra measure of added volatility in its trading. ProShares lists its net asset value premium and discount as having been roughly -2.0% to as high as +6.0%. It noted Friday’s level was a premium of $0.44. It trades over 200,000 shares per day, but it traded over 664,000 yesterday and it saw some 882,600 shares trade hands on FEB 17. As gold is on highs, this one is too.
There are also two ETN’s which essentially offset each other. PowerShares employs more DOUBLE-LEVERAGE ETN’s. The PowerShares DB Gold Double Short ETN (NYSE: DZZ) and the PowerShares DB Gold Double Long ETN (NYSE: DGP) are the leveraged instruments. The PowerShares DB Gold Short ETN (NYSE: DGZ) is just the inverse, just… The average volume on these can be lower as well. “DZZ” traded over 1.6 million shares Friday, more than double its normal volume. “DGP” traded over 4.2 million shares Friday, almost twice its normal volume. DGZ traded over 38,000 shares Friday, about 150% of normal volume.
One gold ETF that is not keeping up with the shiny yellow stuff is the Market Vectors Gold Miners ETF (NYSE: GDX). While it closed up almost 4% at $37.03 Friday, its 52-week trading range is $15.83 to $56.87. This one tracks the Gold Miners Index in proportion to the company weighting in the index, so it invests in the common stocks of global gold miners which are not all US-based companies. Our most recent data shows that Barrick Gold, Goldcorp, and Newmont account for almost 35% of the entire ETF. Its 25 top holdings also account for about 97.8% of the entire ETF. It trades an average of over 8.5 million shares, and it saw over 19.5 million shares trade hands Friday.
We are not going to give trade set-ups here for how you can bet on $1,200.00 or $800.00 gold. That will either be done tomorrow or in our newsletters. And early this week we’ll show you how and why many of the more speculative gold stocks have not been tracking the price of the shiny yellow stuff.
JON C. OGG
February 21, 2009
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