Precious metals (SGOL/GLD) selloff
Monday, April 15, 2013
11:33 AM
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Labels: chart , crash , cryprus , dip , dma , economics , euro , gold , price , selloff , SGOL
Labels: chart , crash , cryprus , dip , dma , economics , euro , gold , price , selloff , SGOL
In the past 5 days gold has fallen approximately 14% from its highs.
Reasons:
* Early last week GS asked its investors to sell gold based on broad economic indicators. Targets 2013-$1450 and 2014-$1270.
* Global crises with the Euro bailout.
* Cyprus dumping 10 tonnes of gold to support bailout. Sparks mass selloff and a chain reaction.
Gold has been oversold beyond limits as pointed out by this chart:
Gold has fallen over 4.5 standard deviations below its 50 day moving average (DMA). It has fallen below the 4 standard deviations mark only 10 times since 1975. This may be a good time to buy?
Price stabalization in commodities:
The production cost of gold is around $900. Gold like any commodity can over shoot up or down
When a commodity trades below production cost producers shut down and supply declines ... prices then stabilize and then advance...
Some select comments on gold falling back to $400:
Comment #1:
"Gold at $400?
Perhaps, perhaps not.
According to some reliable sources Gold was being produced by the 'Old Timers' at $450 to $500 back in 2011. Some highly productive mines can produce at $350 per ounce.
However, when gold price went north of $1,000 to $1,100; many low-yield mines that can't be operated below $1,000/ounce started opening thus the average gold production cost went up as well.
IF and WHEN gold drops below $1,000 then we can almost be sure that those low-yield mines will close down as well perhaps lowering the average production cost to $500 or higher if inflation (or cost of money) is included in the base price over the years."
At $400, I'll buy a 1oz coin every month for the rest of my life. If nothing else it's a good way to pass on wealth to the kids/grandkids without all the paperwork."
Now, the market seems to anticipate a return to a positive interest rates environment, thus the crash we had on Friday."
Reasons:
* Early last week GS asked its investors to sell gold based on broad economic indicators. Targets 2013-$1450 and 2014-$1270.
* Global crises with the Euro bailout.
* Cyprus dumping 10 tonnes of gold to support bailout. Sparks mass selloff and a chain reaction.
Gold has been oversold beyond limits as pointed out by this chart:
 |
| Gold is oversold - 4.5 times standard dev below 50DMA |
Gold has fallen over 4.5 standard deviations below its 50 day moving average (DMA). It has fallen below the 4 standard deviations mark only 10 times since 1975. This may be a good time to buy?
Price stabalization in commodities:
The production cost of gold is around $900. Gold like any commodity can over shoot up or down
When a commodity trades below production cost producers shut down and supply declines ... prices then stabilize and then advance...
Some select comments on gold falling back to $400:
Comment #1:
"Gold at $400?
Perhaps, perhaps not.
According to some reliable sources Gold was being produced by the 'Old Timers' at $450 to $500 back in 2011. Some highly productive mines can produce at $350 per ounce.
However, when gold price went north of $1,000 to $1,100; many low-yield mines that can't be operated below $1,000/ounce started opening thus the average gold production cost went up as well.
IF and WHEN gold drops below $1,000 then we can almost be sure that those low-yield mines will close down as well perhaps lowering the average production cost to $500 or higher if inflation (or cost of money) is included in the base price over the years."
Comment #2:
"If gold ever gets back to $400 I can imagine that a HUGE portion of the physical will be taken out of circulation for a long time. Central banks, US states, commercial banks, and private individuals will be sure to "stock up" for the next major crisis and not be caught wanting again.
At $400, I'll buy a 1oz coin every month for the rest of my life. If nothing else it's a good way to pass on wealth to the kids/grandkids without all the paperwork."
Comment#3:
Maybe we could remind investors of what people were saying when gold started to crash from its high in 1980.
It was something like: Gold is on sale, buy, buy, buy!
However, it was the start of the biggest stock bull market. Investors were stuck in the wrong asset class at the wrong moment.
Curiously, the situation was similar. Big problems in the banking system and so on.
It seems that we are in a similar situation. Bad news everywhere and the stock indexes are racking up record highs after record highs.
It was something like: Gold is on sale, buy, buy, buy!
However, it was the start of the biggest stock bull market. Investors were stuck in the wrong asset class at the wrong moment.
Curiously, the situation was similar. Big problems in the banking system and so on.
It seems that we are in a similar situation. Bad news everywhere and the stock indexes are racking up record highs after record highs.
Comment#4:
"Gold spiked under the negative real interest rates environment and crashed when Volker did succeed at bringing back a positive interest rates environment.
Now, the market seems to anticipate a return to a positive interest rates environment, thus the crash we had on Friday."
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