Free Fall

Gold drops like a rock when the commodities crooks figured they had brought enough suckers into the market. But of course there is the excuse that the Assistant Deputy Clerk in the subdivision of the Interior Ministry's daughter sold her Gold Panda. Obviously in today's market that is the reason to sell off billions in gold. To do anything that is based on the commodities market is like taking your home title and putting it on Double Zero.

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Permalink Reply by Zyll on December 17, 2009 at 4:30pm

Interesting gold day today. My $1,070 floor still stands. It will be hard to crack.

Trader Dan says:
"I have mentioned in previous posts that the selling in gold did not appear to be carry trade unwinding but rather the usual price retracement tied to long liquidation in a bull market. The reason was that many commodities were actually moving higher even as gold was moving lower. That has changed with today’s intense selling as can be seen by the near unanimous wave of selling that is washing over the entire commodity complex. Only a few markets have been exempt from that deleveraging, notably Natural Gas and to a certain extent, sugar and cattle, which are holding reasonably well all things considered.

Some of these hedge funds and managed money accounts have huge profits on their books from playing this carry trade, especially over the last few months, and are now apparently deciding to book those profits before year end. That is a reasonable thing to do considering the fact that they want to show their clients some nice gains for the year. The fear is that if they wait they lose more of those paper profits and thus we get a general stampede in one direction and that is down with commodities and up with the Dollar.

Look for Central Banks to become more active on the sly in acquiring the yellow metal as they take advantage of the lower price to secure it. We have to remember that Central Banks out of Asia are not hedge funds and do not manage their assets like momentum traders. They do not chase prices higher, ever. They are like the old fashioned traders (we are a dying breed) who used to try to buy low and sell high. When the hedgies got their fancy algorithms cooked up, that went out the window for the “investing” community but there remains those who look to buy gold on weakness and not strength. Also, India will become more active in general in the physical market as gold priced near current levels begins to look like a bargain considering we are now nearly $110 lower than we were a mere two weeks ago.

It will therefore be interesting to see how much lower gold might drop before it shrugs off the rally in the Dollar and trades on its own merits as a safe haven instrument."

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Permalink Reply by Steve W on December 20, 2009 at 6:15pm

Safe Haven? Look at LG's post on 16th century Spain. His politics are not accurate, but he has the history right when he talks about Spain's PM fixation and lack of industrial development. By the 19th century they had become Europe's punching bag. Their gold did not make them safe.

Zyll said:

Interesting gold day today. My $1,070 floor still stands. It will be hard to crack.
Trader Dan says:
"I have mentioned in previous posts that the selling in gold did not appear to be carry trade unwinding but rather the usual price retracement tied to long liquidation in a bull market. The reason was that many commodities were actually moving higher even as gold was moving lower. That has changed with today’s intense selling as can be seen by the near unanimous wave of selling that is washing over the entire commodity complex. Only a few markets have been exempt from that deleveraging, notably Natural Gas and to a certain extent, sugar and cattle, which are holding reasonably well all things considered.

Some of these hedge funds and managed money accounts have huge profits on their books from playing this carry trade, especially over the last few months, and are now apparently deciding to book those profits before year end. That is a reasonable thing to do considering the fact that they want to show their clients some nice gains for the year. The fear is that if they wait they lose more of those paper profits and thus we get a general stampede in one direction and that is down with commodities and up with the Dollar.

Look for Central Banks to become more active on the sly in acquiring the yellow metal as they take advantage of the lower price to secure it. We have to remember that Central Banks out of Asia are not hedge funds and do not manage their assets like momentum traders. They do not chase prices higher, ever. They are like the old fashioned traders (we are a dying breed) who used to try to buy low and sell high. When the hedgies got their fancy algorithms cooked up, that went out the window for the “investing” community but there remains those who look to buy gold on weakness and not strength. Also, India will become more active in general in the physical market as gold priced near current levels begins to look like a bargain considering we are now nearly $110 lower than we were a mere two weeks ago.

It will therefore be interesting to see how much lower gold might drop before it shrugs off the rally in the Dollar and trades on its own merits as a safe haven instrument."