Examining the data points, the US trade deficit decreased to $38.8 billion in March, according to official statistics. The total amount of trade (imports plus exports) conducted with the US shrunk more than $7 billion to $407.1 billion. The US’s largest trade surplus was with Hong Kong. The autonomous Chinese region imported $3.2 billion more from the US than it exported. The largest US trade deficit was with mainland China, which declined to $17.89 billion.
$1 billion worth of gold has been shipped to South Africa from New York.
It turns out the $1.1 billion swing is entirely due to unusual shipments of gold from the US to South Africa in February and March. So far this year, 20,013 kg of unwrought gold, worth $982 million, has left John F. Kennedy International Airport (JFK), in New York, for somewhere in South Africa, according to the US Census Bureau’s foreign trade division. (Unwrought gold includes bars created from scrap as well as cast bars, but not bullion, jewelry, powder, or currency.)
The shipments from JFK were the only unwrought gold to leave the US for South Africa in 2013; another large shipment occurred in September 2012.
The numbers indicated in the charts above are a real concern in terms of pricing the yellow metal properly. By historical standards, the paper market and the physical market have become two completely different set of markets. The paper market or electronic price benchmark has been used previously in setting the price of gold as far as I can remember. But in all my short 30 years plus of studying market behaviour, never have I seen such a discrepancy or aberration in pricing the basis between the cash market and the futures markets. This creates one of the most exciting conditions for long – term investors to capture this window of opportunity and build speculative wealth aggressively in a short period of time.
The cash market, in this case it is the physical gold bullion market – in a normal free market environment – prices are affected by changes in the supply and demand balance. A short supply or tight situation represents higher prices based on the increasind demand for the actual product. Ample supplies represents the opposite, or lower prices based on diminishing demand. This is basic 101 economics.
In a recent interview, London gold and silver trader and whistleblower, Andrew Maguire, said that the current precious metals markets are going through a historic transition as market prices shift from being set by paper exchanges in London and New York to prices being set by the physical price of gold in India and, with increasing influence, in China.
“In 30 years of watching the gold and silver markets,” Maguire said, “I haven’t seen anything this exciting.”
Investors didn’t buy enough physical gold to offset outflows from gold-exchanged traded funds in the first quarter, but total ETF gold holdings were still higher than a year ago, and demand for jewelry, bars and coins grew a lot thanks to China and India, a report from the World Gold Council released last week.
- Jewelry: Fourth quarter recovery in the jewelry sector continued into the first quarter of this year.
- Investment: The decline in investment demand relative to Q1 2012 was solely attributable to the net outflows from ETFs, which obscured the strong rise in investment for gold bars and coins at the retail level.
- Technology: Technology demand has been broadly stable, holding around 100 tonnes, over the last six quarters.
- Central Banks: Central banks added 109.2t of gold to their reserves in Q1 2013, the ninth consecutive quarter of net purchases.
- Supply: At 1,051.6t, total gold supply was little changed from first quarter of 2012
Then why are Comex Gold Inventories Collapsing?
In a recent report published on Seeking Alpha, I have been warning my subscribers to take an objective look into the big picture of what is actually happening in the gold bullion market in terms of the supply and availability for the actual metal. All data points seem to indicate some of the most bullish fundamentals I have ever experienced in my lifetime, and yet the prices keep going down.
In the three months covering January through March, gold futures lost nearly 5%, while shares in the largest gold-backed ETF in the U.S., the SPDR Gold Trust GLD shares fell 7.6% the month of April, while gold futures lost 7.8%.
“In the first quarter of this year, we saw the first increase in demand for gold jewelry in the U.S. market in seven years,” said Karl Schott, a bullion specialist with the Equity Management Academy. ”Total jewelry demand climbed 12% in the first quarter, compared with the same time a year ago, according to the World Gold Council’s latest Gold Demand Trends report for the first quarter of 2013.
Jewelry demand from China was up 19% to a record 185 metric tons. Jewelry demand from India rose 15% and the U.S. showed a significant increase in the first quarter, of 6%, for the first time since 2005.”
I asked Sprott Asset’s Rick Rule in a recent interview regarding what seems to be an orchestrated action to deliberately collapse the price of the paper market on the face of relentless physical gold bullion demand?
And he said:
“I’m not sure it was an attack. I’m not saying it isn’t. Either one of two things I think is happening. One is that on a global basis, a lot of leverage momentum players, when they started to see the trades turn. The other thing is I think there is an awful amount of structured prices, which revolve around gold and silver. Structured products become uncomfortable for the holders at the viable end for the holders….
I said, “When you say structure, you mean leveraged?”
“Yeah. People were involved in yen/gold carry trades, which would be an example where people were required to meet margin calls, or as they’re called in this area, performance guarantees, as trade went along, an unwinding of momentum-oriented leverage structured plays can be very vicious. It was particularly instructive, I think, to see the downside volatility occurred in the futures in paper markets, while the underlying physical demand was incredibly strong.” he said.
The Best Cure For Lower Prices Is Lower Prices.
As most market investors will agree, when prices are manipulated to an extreme level the natural market forces begin to shift as the economics of price weakness starts to affect the bottom line. As this transition takes place we can abruptly shift from ample supplies to shortages, literally overnight. I think this is very much the case for the yellow metal as we move forward from the current price levels.
I asked Sprott’s John Embry recently if gold stays at this level do you think production will slow dramatically?
“That’s a really good question. I’m glad you asked me that, because I’ve been sort of an outlier on this subject for a while. For the longest time I believed we were at peak gold production, and that you couldn’t increase the world’s gold production to any great extent because a lot of the old open pits are being depleted, and you can’t find enough new gold and get it online to replace it. So I thought we’d be do well to stay sort of flat. Well what’s transpired recently, I mean, is devastating as the mining sector and gold mining shares have been crushed and I mean all the exploration of any significance is conducted by juniors in that now they have no money and no future. So I think instead of the gold production model staying flat for the next few years, I think there’s a very real probability it could fall dramatically.” he said.
Let’s take a closer look at the GLD Gold Trust Shares ETF derivative instrument and see if we can identify some short – term swing trading opportunities for next week.
The SPDR Gold Trust Shares ETF (NYSEARCA:GLD) closed at 131.07. The market closing below the 9 day MA (137.70) is confirmation that the trend momentum is bearish. A close above the 9-day MA would negate the daily bearish trend to neutral. With the market closing below the VC Weekly Price Momentum Indicator of 133.75, it confirms that the price momentum is bearish.
For the bulls, look to take some profits as we reach the 136.48 and 141.89 levels during the week.
For the Bears, buy corrections at the 128.34 to 125.61 levels to cover shorts.
For new bulls use these price levels on a weekly reversal stop to initiate new positions. If long, use the 125.61 level as a weekly protective Stop Close Only and go neutral if activated.
Our models continue to indicate a long-term bottoming action is taking place and extreme caution is warranted on the short side.
The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts.
This article is brought to you courtesy of Patrick MontesDeOca from Equity Management Academy.
Article source: http://etfdailynews.com/2013/05/20/is-500-gold-possible/
