The Market Oracle reports that smart money is bullish on gold following g20 meeting:
(emphasis mine)
Smart Money Bullish on Gold Following G20 Meeting
Nov 17, 2008 - 08:12 AM
By: Adrian_Ash
THE PRICE OF PHYSICAL GOLD traded on the wholesale market reversed an early 0.7% rally vs. the US Dollar on Monday morning, while world stock markets fell for the 7th time in eleven Nov. sessions to date.
Both the Euro and Pound Sterling slipped back from an early 1.5% jump vs. the US currency, leaving Gold lower for British and European investors.
Crude oil slid from $56 to $51 per barrel as government bond prices rose yet again - pushing the yield paid to new buyers of 10-year US Treasury debt down to 3.71% - despite the G20 meeting of political leaders in Washington this weekend vowing to "use fiscal measures to stimulate domestic demand" while taking "whatever further actions are necessary to stabilize the financial system."
(For those phrases, read " a flood of new government debt" plus " unlimited bail-outs for failed institutions ...)
A joint committee on cross-border regulation of the financial markets is now scheduled to report on March 31st next year.
"The precious metals are continuing their consolidation," says today's note from Mitsui in London.
"Gold is doing better that the more industrial metals, with the pressure on the auto industry capping the [platinum group metals]."
Latest data, released overnight, show Japan sliding into recession between July and Oct. as gross domestic product contracted for the second quarter in succession - the sixth such technical recession since Tokyo's equity and real estate bubble burst at the end of 1989.
Across the Pacific, $22 billion of the $25bn rescue bill for auto-makers now before Congress could be eaten up by General Motors alone, according to a report from Goldman Sachs.
The investment bank has also suspended its rating of GM's stock, suggesting that - after falling 91% over the last 12 months - the equity is now worthless.
The 15-nation Eurozone saw its net trade balance improve only slightly to minus €5.7 billion during September. And here in the United Kingdom today, the Rightmove index of residential-property asking prices showed a 2.9% drop for Oct. after sellers hiked their expectations by 1.0% in Sept.
"Maybe investors are a bit more cautious about gold as a safe haven asset given that the price, obviously, compared with a couple of months ago, has fallen," says David Moore, a commodities analyst with Commonwealth Bank in Sydney, Australia.
"The Gold Price has also been very volatile at times as well. I think there's a preference for cash at the moment."
For Australian investors, gold has retreated by one-fifth since early Oct., when it shot to new all-time highs above A$1,400 an ounce.
Trading above A$1,130 today, Gold Bullion remains nearly twice the price of this time three years ago.
"Liquidity will probably deteriorate even more as we move into December," reckons Steven Barrow, writing today for Standard Bank in London.
"As the liquidity provided by short-term speculation declines, currencies could be left at the mercy of whatever trades have to get done at this time of year...And as December tends to be a seasonally weak month for the Dollar, the greenback could suffer as we near Christmas."
New data released after the New York close on Friday showed hedge funds and other institutional traders are now less bullish on the price of Gold Investment than at any time since July 2005 - just before gold kicked higher and rose more than 70% over the next seven months.
At 66.9%, the bull-bear ratio of Gold Futures and options held by so-called "large speculators" also pointed to the continued loss of leverage and credit for hedge fund traders, with the total volume of US gold derivatives shrinking by one-third since mid-July.
Commercial traders, in contrast - meaning those gold traders working for refiners, fabricators and wholesale jewelers commonly known as the "smart money" - cut their bearish bets on the gold price to a 16-month low.
These participants in Comex gold trading are naturally 'short' of gold at any one time, since they are in the business of selling gold by defintion. They look to protect their profits by hedging on the futures market, but last week's move raised their bull ratio to 42.7%, a seven-year record.
After the price of gold rose for the last two weeks running against the Dollar, "eleven of 23 traders, investors and analysts surveyed from Mumbai to Chicago on Nov. 13 and Nov. 14 advised Buying Gold ," reports Bloomberg News in its weekly survey today.
"Six said to sell, and six were neutral."
My reaction: Two key points in this article:
1) Hedge funds and other institutional traders turning bearish on gold is a positive sign. It means that the selling, as speculative money come out of gold, is nearing an end.
2) The "smart money" is cutting their bearish bets on gold. No real surprise.
With the bailout money is disappearing at an incredible pace (means size of 700 billion bailout will be increased) and November 28 looms large for December gold contracts, Gold is now set to explode upwards.
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Eric, on another article you said it is unlikely "G-20's Secret Credit Crash Debt Solution" is going to happen, since China will be very furious of that.
But, for China, when US$ hyperinflation occures, government debt disappears too. I see the same result for creditors.
So why do you refuse G20 agreement on new currency (as supposed in linked article) can be settled?
Second, i am interested in your opinion: if the hyperinflation scenario will be pushed, what is to be expected within the scope of other currencies? Will that leak into massive world scale inflation or local currencies are going to left sideward?
Wish you best and thank you for interesting topics.
Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus—$2 trillion and counting, going up by about $1 billion per day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the United States has over the past 10 years or so borrowed about $5,000 (5oz of gold) from someone in the (poor) People’s Republic of China.
Now Larry Edelson is proposing the US take that dept to China and make it into .5oz of gold per capita instead of 5oz. Why would China ever go along with that?
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As to why I don't believe we will be seeing a world currency anytime soon, the answer lies in the problems plaguing the euro. Here is one example:
Governments can go bankrupt if they don't control their own currency or interest rates. Because of this, there are strict budget rules governing the euro. This makes difficult for nations to deal with recessions because they don't control interest rates and their spending is limited by budget rules.
There are a buch of other problems with a euro-like world currency. In fact, All the problems with the euro would be even worse in a world currency.
For more on how the euro is faring, check this link::
The Euro Has Very Real Problems - And Nobody Really Stands Behind It
I agree with you on the your points. I do think gold is set to go through the roof. Silver too. The 700 billion is nothing compared to the trillions that have actually been spent and promised. Ad to that the automaker debacle and the dollar is in some serious trouble.
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