247Bull.com Editor: If the gold bull market has indeed reached its peak, then it is perhaps the only time in history that a long-term secular bull market has ended without any of the usual signs of a major market top. I.e., broad participation by the general public, prices at new all-time highs (in real terms), and new discoveries/ mine supply coming on stream. It would also be the first time that “the heard” was right on the direction of the market. In short, this doesn’t look or feel anything like a major market top, rather it looks and feels like a significant bottom.
The price of gold bounced off a fresh 7-month Dollar low on Thursday morning in London, rising after their worst 1-week drop since May 2012 amid what one analyst called “a proper sell-off on the precious metal markets.”
Prices for Eurozone gold investors fell to a 16-month low at €1172 per ounce, despite a further 1¢ drop in the single currency to its own 6-week low of $1.3166.
European stock markets meantime fell hard after worse-than-expected manufacturing data.
Asian equities closed 1.4% lower as the People’s Bank of China withdrew liquidity pumped into the money-market ahead of last week’s Chinese New Year holidays.
Minutes from the US Federal Reserve’s latest policy meeting, released on Wednesday, “suggest that the quantitative easing programs could be cut,” reckons UBS Equities global-commodity analyst Tom Price, speaking to India’s CNBC-TV18 today.
“That means that primary driver – inflation – is just not there to support the gold price.”
Rising prices on 10-year US Treasury bonds today pushed their interest rate below 2.00% for the first time in a week, an all-time low when first hit in September 2011.
Overnight in Asia, gold prices hit their lowest Dollar level since 11 July 2012, dipping beneath $1557 per ounce and down 6.3% from the start of this month.
In the world’s two biggest gold-consumer nations, Indian gold prices also hit a 7-month low, while gold traded in Shanghai hit its lowest Chinese Yuan level since May last year.
Silver meantime hit a 6-month low of $28.56, down more than 10% from the start of February.
Platinum prices this morning traded 4.3% below Wednesday AM’s London Fix.
Palladium prices – which rose by nearly one-third between Nov. and Feb. – today stood 6.2% lower from yesterday morning.
“The continued outflow of medium term and macro money from bullion [has] intensified,” writes Moudi Raad at refinery group MKS Pamp in Geneva.
“Gold is struggling to find the marginal buyer right now,” says Credit Suisse’s Tom Kendall, who announced the End of an Era for Gold at the start of this month, with gold prices having peaked in mid-2011 and so looking “significantly overvalued [now] the acute phase of the global financial crisis is probably over.”
“The problem with gold and silver,” says Citigroup analyst Jon Bergtheil in a new report, “is that they are very ‘long cycle’ metals, and there is a significant risk that we have recently seen the peak of such a long cycle.”
Bergtheil raised Citigroup’s 2012 and 2013 price forecasts in October 2011, a month after gold prices hit their current all-time Dollar high of $1920 per ounce.
“If [gold and silver prices] ARE in the process of peaking now,” says the latest Citigroup view, quoted by Barron’s, “then history suggests that they could go into hibernation for a very long time.”
Wednesday saw trading volumes in US precious-metals contracts jump dramatically, notes Commerzbank.
Turnover in gold futures was 67% higher than the 6-month average, with silver volume at 160%, platinum “nearly double” and palladium “more than three-fold”.
Trading in the oil market was also “extremely high”, says Eugen Weinberg’s team in Frankfurt, with the plunge in energy prices “suggest[ing] that financial investors, and allegedly even a hedge fund, have liquidated long positions.”
The world largest exchange-traded silver trust fund, the iShares Silver ETF, meantime added 18 tonnes to the 10,522 already backing its shares on Wednesday.
But holdings in the $70 billion SPDR Gold Trust (ticker: GLD) however fell at the fastest pace since 24 August 2011, down by almost 21 tonnes to 1299 tonnes.
The first drop below 1300 tonnes in 5 months, that fall took total holdings in the GLD 4% below December’s record.
Adrian Ash | BullionVault