Bill Fleckenstein's Comments On UK Gold Sale
<< Gold gets bombed... Europe was pretty quiet. The big news overnight was, in honor of the NATO bombing campaign, the Bank of England decided to bomb the gold market. It came out and said it was going to sell half the reserves over time, and in the next few months it would sell about 3 percent. If the bank sells half its gold holdings, it works out to about $3 billion. The amount it has deemed appropriate to sell in the next few months works out to be 200 contracts a day in a market that trades easily 50,000 contracts. So it's really not a very big deal, but psychologically it did its damage. Almost immediately after the news gold was down 10 percent and closed down $7 on the day, just under 4 percent.
I'd like to share with you a couple of quotes from people whose opinions I respect and are astute observers, and have not been known to be friendly to the gold market. Joanie said the following regarding the Great Britain announcement: "No wonder, either. With the short in gold rumored to be at historic levels, the powers that be know exactly what they have done and must be sweating peanut butter. Serves them right."
Dennis Gartman made an even stronger point in his morning piece, which came out before the news was released. He said: "The strength in gold will almost certainly cause the G7 monetary authorities concern, for it is clear that they have wanted to drive gold prices down via their consistent and concerted announcements regarding potential IMF sales."
So then later in the day, when the Bank of England news was announced, he said: "Further, the Bank of England's decision announced earlier today to materially liquidate its gold reserves, seems rather late in coming and rather almost too obvious in its intent. Where was the bank in the past several years, holding gold as prices fell relentlessly? Why is the bank suddenly now becoming bearish? For what purpose is the bank making this announcement? We suggest it is as we noted earlier today: An attempt by the monetary authorities of the G7 to jawbone gold lower so that they can point to gold's weakness as evidence of the validity of their monetary policies."
What will be interesting is the point in time when the gold market spits in the face of one of these announcements and starts to rally. That would be a signal that maybe some powerful up move may start. Here's something that's as hated as stocks are loved, and at some point it will be a very interesting market to be long.
Silver stays strong... Silver, on the other hand, was a stalwart. After being down over 20 cents overnight in the early going it was actually unchanged. Doing its best imitation of The Little Engine That Could, it closed up 5.8 cents on the day - a little over a percent - indicating that maybe the leader of the precious metals brigade prospectively will in fact be silver. The other precious metals, palladium and platinum, were also more or less unaffected as well. So for once there was a differentiation in the metals market, and potentially it may end up helping gold out as well. -- cont'd -- >>
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