Gold gets a thorough smacking - ignores good new, over-reacts to bad, says Ross Norman
Source: Sharps Pixley , Author: Ross Norman
Posted: Tue May 8, 2012 3:25 pm

INTERNATIONAL. If, as we have said before, you can tell something of a market from how it behaves under adversity - then what does today's surprise fall to a five month low to key technical support on the trendline tell us ?

Gold has been on an extended vacation for a few months and its performance has been lacklustre. Witness the decline in COMEX open interest and the lack of momentum in the charts.

OK, so it has been caught in the cross currents of a deepening European financial crisis (prima facie BULLISH), the corollary to which is a firmer US dollar (prima facie BEARISH).

But worse of all it has failed to adopt either argument with any real conviction... it has, well, just sat there, observing. Hardly the action of arguably the most important bell-weather in the financial sphere.

This morning two major pieces of market news - firstly, the Indian government have performed a U-turn on the proposed doubling of duty on gold jewellery imports and secondly, Chinese Q1 2012 demand has rocketed - up sixfold y-o-y - these are news stories of seismic importance. Neither elicited a move greater than the typical bid/offer spread of the spot price... nada. 

It is less clear why gold has fallen so sharply - it could as well be attributed to Euro weakness on a deteriorating Greek situation (are the Greeks losing their marbles ? - English joke) - or possible selling of oil by Iran to China in exchange for gold, leading to a spot gold sale to close out the trade.

Or possibly a significant short position placed on gold by Berkshire Hathaway who seem to be at war with this asset class. Buffett's right hand man is quoted as saying "Gold is a great thing to sew into your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold - they invest in productive businesses."

More likely and simply gold may be suffering from investor fatigue - something I remarked upon at the recent Dubai gold conference... this very much resonates with us. Many of us associated with the gold market have benefitted from the creation of a number of new products, distribution channels, and mediums through which metal is traded - a proliferation of ways of gaining access - but almost no serious innovation for the best part of five years.

 This article is republished with permission from Sharps Pixley.

Click here for more information about Sharps Pixley.

© Copyright Sharps Pixley 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

RELATED ARTICLES

The dollar & gold have eyes on Europe

Economic soft patch hurting commodities, gold continues to frustrate bulls

Silver rally by no means over, could rise to US$100 - Dubai Precious Metals Conference

Gold rallies following disappointing US jobs data, touches lowest level this year in pounds

Gold lackluster in 'calm before storm'

Central bankers leading the way on gold

Europe teeters on a knife edge - Physical gold demand rising

A return to real money - gold and silver

Will the re-birth of uncertainty and consumer demand fuel gold?

I will buy more gold and silver when prices fall, says Jim Rogers

Gold 'not looking great', but fundamentals 'still solid'

Buffett is wrong on gold bubble, says Peter Schiff

James Rickards sees gold standard at US$7,000 per ounce in the face of a dollar collapse

Peter Schiff: Was 2011 the end of the gold rush?

Marc Faber, Jim Rogers clash over China and commodities, agree on gold

 

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

date:Posted: October 22, 2014
INTERNATIONAL. The problem with an export-based economy is that the exporter is the hostage of its customers. Germany's and China's well-being depend not only on how they manage their economies, but on how their customers manage their own economies.
date:Posted: October 22, 2014
UAE. Middle East investment banking fees reached US$138.2 million during Q3 2014; debt issuance reached US$6.3 billion; The UAE was the most active nation accounting for 45% of the debt issuance activity.
date:Posted: October 21, 2014
UAE. CIOs are faced with balancing the needs of workers to be more mobile and have more choice with the needs of the enterprise to protect its data regardless of the delivery channel.
UAE. Middle East investment banking fees reached US$138.2 million during Q3 2014; debt issuance reached US$6.3 billion; The UAE was the most active nation accounting for 45% of the debt issuance activity.
dhgate