Bear raid batters gold

New York closed Friday at $1,133.90 down $11.20. In Asia the gold price fell $20 to $1,113 ahead of London’s opening.  London barely lifted it back to $1,115. The dollar was stronger at $1.0834 up from $1.089, against the euro, with the dollar Index at 98.02 up from 97.54.  The LBMA gold price was set this morning at $1,115 down $28.00, after a heavy sale at the close in New York on Friday. The euro equivalent was €1,029.31 down €20.08. Ahead of New York’s opening, gold was trading in London at $1,114.60 and in the euro at €1,028.56.

The silver price fell to $14.89 down 12 cents in New York. Ahead of New York’s opening it was trading at $14.75.

With the Technical picture looking bad we saw a remarkable ‘bear raid’ at the close in New York too late to affect that market. But it translated into Asia and London prices falling $20 down from the close in New York. Evidence that this was a ‘bear raid’ was given by a static silver price this morning which was the same as the close in New York. There were sales of 11.626 tonnes from the SPDR gold ETF [but none from the Gold Trust] leaving the holdings of the SPDR gold ETF at 696.252 tonnes and 167.76 tonnes in the Gold Trust.

One can use these ETF positions to ‘short’ the market so their motive appears to be to trigger ‘stop loss’ protections and try to panic the market lower.  We have seen repeated attempts like this ‘raid’ to achieve this in the last few weeks with the biggest moves in prices happening at the close or opening of a market with trade during that market’s day being insufficient to move prices much. This sale of over 10 tonnes is the second one this month but because of the timing and size, does not have the ‘shape’ of a long term investor closing a position.  What it has achieved is to take prices down to very close to the downside target indicated by the Technical picture.

At a time of the year when Indian markets are in their summer ‘doldrums’ with the developed world factoring in a change of trend in interest rates to the upside combined with a stronger dollar, speculators saw a chance to launch the bear raid.  The question is, “Is this a final sell-off?”

On the fundamental side very few of the world’s gold mines are now profitable, so if such prices persist, watch their ‘lives’ being shortened as they switch to their high grade reserves and away from low grade reserves. Others may be forced to close down. Such industry action reduces supply after a while and forces prices back up as demand outweighs supply.

More importantly a major U.S. banks survey saw their institutional clients now see gold as offering an opportunity to take positions.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

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