…………………An Inconvenient Truth
What force has been able to cap gold’s move into the face of nuclear threats from North Korea and Iran? What prevented gold from exploding higher as Israel invaded Lebanon, as Iran thumbed it’s nose at the free world and as the US Dollar has collapsed to new lows?
Is it a mysterious force?
--- Shenanigans from offshore hedge funds?
--- Blatant Central Bank manipulation and intervention?
--- The “PPT” Exchange Stabilization Fund?
The price of gold is driven by many catalysts… the US Dollar, global currencies, US deficits, geopolitical risk, elections, the price of oil and other commodities, the bond market, the stock market, liquidity, interest rates, money supply, monetary policy, derivatives and on and on…
While all of those factors drive the price of gold; none of those catalysts named above are responsible for capping the price of gold.
What capped gold’s rise is neither complex, or mysterious;
but rather a simple inconvenient truth called physical demand.
Gold bugs were told that the explosive growth in India and China alone would push gold to new highs. That there would be massive buying from both Russian and Chinese Central Banks and the new Chinese ETF. Gold bugs have been told by virtually every source that physical demand for gold is soaring.
…and nothing could be further from the truth.
A rather inconvenient truth that can be verified here:
gold.org
The facts are that end user physical demand for gold, year over year (2006 vs. 2005) has fallen by -12%.
-- Global jewelry demand has fallen by –18%.
-- Industrial demand has fallen by –7%.
-- Dental demand has fallen by – 4%.
-- Gold bar demand has fallen by – 36%.
And in Q3 2006, as compared to Q3 2005…ETF demand fell by a staggering – 46%.
Physical demand is what separates speculative bull markets from secular bull markets, because it creates both a floor under the gold price and removes it’s ceiling.
Just as physical demand was collapsing, gold bugs were told to – “hold tight.”
They were told that gold would soon be re-priced in “1980-dollars.”
Just as ETF demand was cratering they were teased with – “The Chinese ETF.”
Just as global jewelry demand rolled over – they were told that demand from China and India was about to drive gold higher.
Just as gold reached it’s parabolic speculative top in May, they were assured that Central Bank buying from both China and Russia was about to drive gold ever higher.
Just as industrial demand collapsed – they were told that gold would follow Oil, Nickel and Zinc ever higher.
…there was just one problem
It was all a big lie.
Where were the profit taking warnings from the advocates and guardians of the gold community in May?
Why didn’t they issue the order to ring the cash registers, to pocket the gains and to walk away…as the momentum traders, speculators and the general masses rushed into gold – as physical demand simultaneously collapsed?
-- where were the warnings from the gold stock newsletter writers & editors?
-- where was the honesty from fund mangers like Hathaway & Embry?
-- why did Jim Sinclair implore ‘bugs to “hold tight” directly into the collapse of gold?
Why was the simple inconvenient truth about demand missed and ignored by so many?
SliderOnTheBlack |
