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Gold, ETFs, the Fed, and Equity Valuations

Over the past year or two, as the broad equity indexes moved from one high to the next, institutional money – seeking higher quarterly returns – has been moving out of gold and into stocks. This institutional flight from gold by Western investors may have been the single-most important factor weighing on gold prices in the past couple of years – and it owes much to the introduction and popular acceptance of gold exchange-traded funds over the past decade. ...

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Gold Slumps as Wall Street Soars

With the Dow topping 16000 and the S&P500 index reaching 1800 – both psychologically important levels – gold continues to be an innocent victim of the frenzy on Wall Street. Trading around $1245 an ounce the metal’s price is off some 25 percent from the start of 2013 and is 35 percent below its September 2011 all-time high. Reflecting the super-stimulative monetary policies currently pursued by the U.S. Federal Reserve, the Bank of Japan, and the European Central Bank, U.S. and world equity markets are achieving new all-time highs as more and more investors jump on the stock-market ...

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GOLD: Institutional Divestment Nearly Over

Gold has been in retreat since hitting an all-time high of US$1,924 an ounce in September 2011. That's an astonishing decline of more than 35 percent -- a whooping correction in the midst of, in my view, a long-term bull market that began roughly a dozen years ago and still has years of life ahead. Over the past year and a half, hedge funds and other institutional investors have been persistent sellers -- mostly of gold ETFs. In doing so, they have provided ample supplies to meet the persistent and continuing demand for physical metal by Asian investors and central banks. ...

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Suffering Gold

Gold continues to suffer under a cloud of bearish expectations.  Its price has been trending lower for some 20 months now - and, at recent lows, it is off some 30 percent from the September 2011 all-time high of $1924. A growing number of investors, analysts, and journalists are already writing obituaries for the decade-long bull market and foresee only a grim future for the yellow metal.  These naysayers, most prominently economist Nouriel Roubini who gained some renown for predicting the financial-market debacle of 2008, point to a number factors to support their bearish ...

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Captive Gold: A Quick Note on the Current Market

For now, gold remains captive to the flow of U.S. and global economic indicators and prospects . . . especially those that may influence Federal Reserve monetary policy. With the U.S. economy far from a satisfactory and self-sustaining recovery, the news is likely to become increasingly positive for gold -- with diminishing expectations of imminent "tapering" (that is scaling back the Fed's monthly bond-buying program) eventually replaced with talk of additional monetary stimulus of one sort or another. Home in the Range At the moment, however, gold appears range-bound between $1370 and ...

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Time for Contrary Thinking . . . and an Asset Allocation Adjustment

Sentiment in the gold market - especially among the hedge funds and institutional speculators - is already EXTREMELY NEGATIVE.   Market psychology can't get much worse.  Even the gold bugs are dumbfounded.  But, contrarians say this unbalanced situation could be signaling an approaching upturn in prices. The downward pressure on prices emanates from two distinct sources of selling:  First, trading by the gold dealing firms and institutional speculators in the regulated futures markets and the unregulated over-the-counter markets often guided by complex computer algorithms.  These are the ...

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GOLD — What’s Going On?

Gold prices have caved today under pressure from dollar appreciation and wave of technical selling at key chart points - selling aggravated by continued flow of funds from gold (and commodity indexes) to equities. Just as the rising price trend in the equity indexes has attracting more buying, the renewed downward momentum in gold is engendering short sales and more outflows from gold ETFs. Importantly, program trading and other technical strategies have added to the downward pressure on gold - and continue to do so.  (See my previous commentary posted earlier today for more on program ...

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Dark Pools, Program Trading and the Decline of Gold

Day after day, gold trading has been, and continues to be, dominated by institutional trading in the "dark pools" where over-the-counter dealer and interbank activity goes largely unseen. Don't under-estimate the influence of trading in the dark pools where "invisible" institutional trading can - in a flash - knock gold to the mat, leaving most gold-market participants and observers wondering what happened. Indeed, much of this activity in the interbank and dealer market goes unreported - but buy-sell transactions, high-frequency, and other program trading in these dark pools, often at ...

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GOLD — Confounded by the Machines and Dark Pools

Gold continues to confound, dropping another $25 an ounce this morning as technical and computer-driven program trading triggers selling on U.S. derivative markets, all despite favorable fundamentals and what should be seen as favorable economic and geopolitical developments. Gold Lower Despite Bullish News This morning's dispatches from India and China, the two biggest gold-consuming nations, report that demand in these markets continues unabated . . . and coin dealers report still-strong retail demand for bullion coins and small bars in the Western markets. News from the Middle East -- ...

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QUICK MARKET COMMENTARY

Despite further gold ETF liquidation in recent days and some short spec selling on futures exchanges, gold prices are moving higher on unrelenting physical demand for small bars, coins, and jewelry from the gold-friendly Asian markets as well as retail investment demand in US and European, especially for gold (and silver) bullion coins. It is particularly encouraging to see gold move higher despite the stronger dollar (against the euro and yen, for example) . . . and at a time when equities are moving lower (or at least are not moving higher). In the past year and a half, the continuing ...

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