Bron Suchecki admits not being sure how to read current market behaviour. On the one hand, weak investor sentiment could be signaling a bottom. On the other hand, it could also signal a sell off in gold and silver prices if the large seller(s) which caused the mid-April crash will test the strength of the market. Regulators did not show too much interest to investigate this anomaly, so why should the seller(s) not repeat it.
GLD ETF liquidation points to disinterest of some types of investors with a profound impact on price, at least short to mid term. However, physical gold selling by the GLD ETF and COMEX are not necessarily signaling the end of the bull market. Physical gold selling and buying is an equation. The gold market is not one dimensional.
Demand for physical gold remains extremely high all over the world. After the flash crash of mid-April which statistically occurs once in a billion years the flight to physical gold and silver has been unseen. Premiums had risen to extreme levels. In fact, the premiums are still extremely high, reflecting the continuing high demand. Only in India and Hong Kong have premiums come down from their highs earlier this month.
The gold price is not what matters, but the price of gold will be much more important going forward! After the mid-April crash, premiums have been quoted as much as 25% above the gold price which completely negated the entire downward move of the price of gold in the futures market.
Belgium has sold some 1,000 tons of gold into the market. Belgian gold reserves were +1,000 tonnes in 1978. Interestingly, the EU membership and monetary union played a significant role in the sale of its gold. The revenues of their gold sales were reported to reduce government debt in foreign currencies. The central bank of Belgium announces that 25 tons of their gold reserves has been lent to bullion banks, but that the amount is set to decline.
According to the latest report from the IMF, central banks of Russia, Kazakhstan and Azerbaijan have increased their gold reserves last month. The three countries have added some 12 tonnes to their gold reserves in April. Moreover Turkey has added approximately 18.8 tonnes to their official gold reserves.
David Morgan believes that the paper market will still dominate the price through 2014. Right now, there are big differentials between the retail price and commercial bar prices. As long as commercial bars will be delivered in a somehow timely manner the paper market will have some basic credibility. Once that breaks down, it will signal the tipping point.
You have to realize how crazy-anomalous 2013 has been. Melting-up stock markets breeding euphoria are very rare, only seen at the ends of major bull markets. Stock euphoria diverting capital away from all other asset classes is equally as rare. But if you’d told me how 2013 would play out in the stock markets, GLD, and gold, but said SLV would ignore the carnage, I would have thought that was utterly impossible.