Monday, February 25, 2013

Why is the gold price down?

10 year gold price

Right now the gold should be rising so why is the gold price down?  Against all logic the price of gold has remained in a 1600 to 1700 range and, even, just recently dropping below the 1600 mark.  It seems as soon as it starts to reach up, wham! It gets knocked back.
Perhaps the answer lies in this interesting comment by noted Analyst Chris Martenson.
“As I noted in the run up to the QE4 announcement and then in the days right after, some entity has been selling literally thousands and thousands of gold contracts into the thinly traded overnight markets so rapidly that we have to use millisecond charting to see it for what it is.  Again, there is no other legitimate explanation for this activity of which I am aware besides having an intent of pushing the price down.
“Whether there is some motivation for this activity besides 'making money, I remain convinced that the gold market, like many others, is no longer sending useful price signals. Instead it is telling us that some entity has found it useful to sell thousands of gold contracts all at once.
“The interesting part of this story is that this has been the most sustained, intensive, and yet ineffective gold-selling that I have yet seen.  In the past, such bear raids, as they are called, would have resulted in a sharply lower gold price.  Right now, that has not yet really happened.”
The main effect this seems to be having is to push out the weak willed and hesitant.  Certainly the central banks and major Asian countries are not dissuaded from accumulating gold.  
The gold price we are seeing every day in the media is not the gold price right now but the paper gold futures price. This gets glossed over and the mind set is that it is the gold price that is weak.  Whereas it is simply the paper gold price being pushed down so they can buy at lower levels before allowing it to rise again and then repeat the cycle over and over again. 
China, for example, is buying up when the price drops and pauses when it rises. China is fast becoming one of the major holders of gold in the market place and is supplanting their holdings by buying up gold mines in order to get gold at a even cheaper price.
The GOOD news is that looking at the gold price chart above, it can be easily seen that this is a similar scenario to 2008 when the gold price was pushed down heavily and yet later the following year continued its climb to the, what was then considered rarefied heights of over a thousand dollars an ounce.  Apart from a peak of 900 and a low of 1550 it has steadily remained in the realm of 1600 to 1800 for close on three years so a break out is certainly inevitable and all the signs are there for a resumption in the climb towards the next level. It is just a matter of when. 
As Chris Martenson remarked.
I am wondering if a big up move is not right around the corner for gold.  I can tell you that if even one fourth of the recent QE effort was announced five years ago, markets would have exploded and gold would have absolutely launched...”
This could be part and parcel of why the price of is gold down, relatively speaking and maybe now is time to do as the banks and governments are energetically doing.  Buying gold while it is still cheap.

No comments: