Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Over 1% and 2% on the Week
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 11 17 2017
By: Ira Epstein

Next-Generation Crazy: The Fed Plans For The Coming Recession
By: John Rubino

COT Gold, Silver and US Dollar Index Report - November 17, 2017
By: GoldSeek.com

Gold Miners’ Q3’17 Fundamentals
By: Adam Hamilton, CPA

Bonfire of the Absurdities
By: John Mauldin

The Social Security Inflation Lag Calendar - Partial Indexing Part 1
By: Daniel R. Amerman, CFA

Rob From The Middle Class Economics
By: Gary Christenson

GoldSeek Radio Nugget: John Williams and Chris Waltzek
By: radio.GoldSeek.com

The Metals Market Is A Mess And Will Likely Continue To Frustrate You
By: Avi Gilburt

 
Search

GoldSeek Web

 
Market Report: Good start to September


 -- Published: Friday, 9 September 2016 | Print  | Disqus 

By Alasdair Macleod

MR Sept9 1

The end of August saw an options expiry plus a month-end, both factors leading to lower prices.

But despite the Labor Day holiday on Monday, which kept trade quiet this week, precious metal prices rose strongly, before some consolidation set in on Wednesday. Gold had risen from $1310 the previous Friday to a high of $1352, before drifting off to $1336 in early European trade this morning. Silver bottomed at $18.75, and rallied to $20.13 before drifting off to $19.52 on the same time-scale.

Pundits with little else to say tell us that September is traditionally a good month for gold. Nice to hear, but as they say, past performance is no guide for the future. But with August’s dog days behind us and the holiday season as well, investors are likely to give market valuations more attention. The rally in precious metal prices this week was entirely logical, as was some profit-taking in the second half.

What continues to confound many observers is the over-bought condition on Comex, defined by the net longs in the managed money category. This is shown in the next chart.

MR Sept9 2

The managed money category holds record long territory, greater than at the speculative peak in the gold price in September 2011. Furthermore, the switch from negative sentiment from last December is the most remarkable flip in the history of the chart. The strain this switch in sentiment implies is reflected in the swap positions, shown next.

MR Sept9 3

The chart, which is of the last two years only, shows how the swaps have been unable to close down their net short positions by much, from the all-time record level of early-July. It also shows a close correlation with the gold price, which is actually what should happen.

A little explanation is needed. The role of a swap is to hedge positions, taken out elsewhere, perhaps reflecting options or over-the-counter (OTC) commitments. However, increasingly swaps appear to have reflected the net positions of bullion banks’ trading books, and become the counterpart of speculative hedge fund bets. Hence the almost perfect negative correlation between the two categories.

That correlation persists to this day, and one way or another, the extreme positions both categories reflect today will end in tears. The question is, will the managed money category overwhelm the swaps, or will the swaps prevail yet again? There is some anecdotal evidence that less speculative funds are using Comex to build their exposure to gold, having had no exposure to the best performing asset class so far this year. Therefore, there is good reason to expect the squeeze on the swaps to continue, forcing them as a class to abandon their short bets.

They have been helped somewhat by evidence of increased hedging by the miners. But negative interest rates, and the failure of unprecedented global monetary expansion to improve the economic outlook, is an enormous incentive for western investors to continue to buy gold.

This is why September might matter. Traditionally, this is the time of year when Asian wholesale demand begins to pick up. If this conflicts with increasing demand from underweight western investors, it could be fireworks, or even a bonfire, for the swaps.

The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information purposes only and does not constitute either Goldmoney or the author(s) providing you with legal, financial, tax, investment, or accounting advice. You should not act or rely on any information contained in the article without first seeking independent professional advice. Care has been taken to ensure that the information in the article is reliable; however, Goldmoney does not represent that it is accurate, complete, up-to-date and/or to be taken as an indication of future results and it should not be relied upon as such. Goldmoney will not be held responsible for any claim, loss, damage, or inconvenience caused as a result of any information or opinion contained in this article and any action taken as a result of the opinions and information contained in this article is at your own risk.


| Digg This Article
 -- Published: Friday, 9 September 2016 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.