Friday, February 22, 2013

'Huge GLD Metal Reduction' Scary Buying Op?

HOUSTON -- Gold market watchers have been bombarded with a litany of negative, scary sounding commentary and labels just recently.  Gold bears are feeling triumphant and cocky about now with 20130222 GLD barsgold off something close to $70 in just over a week.  So they are out in force, on TV and in print pounding the table and talking their book with the best, scariest lingo and jargon they have. 

Can't say we blame them.  This is a rare chance for gold bears, but is it us, or are the bears sounding kind of hyperbolic just rencently? (More...)  

 


The so-called “Death Cross” technical signal, for example, which we took a look at earlier this week in charts. (Our coverage here.) The Death Cross has not been nearly as terrifying as the name implies since the gold bull market began, but it sure does conjure up visions of the apocalypse for gold mavens.  OMG! It's ... it's ... it's a dreaded Death Cross!  Grab your children (and their college funds) and run, run for your lives! 


That’s the idea, you know.  To scare the ‘bejesus’ out of people when the scaring is good. 

Yesterday we saw several sensational headlines regarding the outflows of metal from SPDR Gold Shares (NYSE:GLD), the big gold ETF.  One screamed “GOLD ETF OUTFLOWS DRIVE VICIOUS CIRCLE OF SELLING!”  Another blasted “Investors Yank Over $3 Billion from Largest Gold ETF.”  Yet another exclaimed, “GLD Sees Largest Single-Day Outflow Of Gold Since 2011.”  

So, we thought we would look at the numbers, which we are wont to do here at Got Gold Report.  And sure enough, there really has been a significant outflow of gold metal reported by GLD.  But when we compare to similar negative liquidity events in the recent past, the bearish implications of a GLD metal reduction, even one in size, are not all that clear. 


For the record, since GLD metal holdings peaked on December 12 of last year (gold then $1,712 in London) at a record 1,353.35 metric tonnes, the gold ETF has seen 63.04 tonnes (4.7%) sold back into the gold market by the trusts’ authorized participants, to show 1,290.31 tonnes of gold as of today.  That large drop in holdings shows on the chart clearly with about half of that drop coming in just the past panicky hedge fund fear mongering week.  

20130222 GLD metal
  (Source:  SPDR Gold Shares and Got Gold Report)     
 
Just a quick glance at the chart, however,  shows no fewer than four previous large metal reduction events for GLD since the summer of 2010. 

You know what is an interesting coincidence for all four of them?  Hold onto your gold plated bull or bear statues and listen up! 

Yeah, that’s right, in all four cases the large drops in metal holdings were immediately or soon followed by rising gold prices. 

Charitably in deference to our friends in the financial media:  Death Crosses, and “Vicious Circles of Selling” notwithstanding, maybe in a bull market the most obvious signals are not what the headline writers think they are?

In fairness, the jury is still out on this GLD metal reduction event, but recent history suggests a GLD metal reduction of size is a buying op.   The chart says so, does it not? 

Guess we will see soon enough, eh? 

Gene Arensberg for Got Gold Report  


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The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

"I've been a huge fan of Gene and his amazing work for years..."

Brien Lundin, CEO, Jefferson Financial, Host of the annual New Orleans Investment Conference and Publisher of Gold Newsletter


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