Commodity Trade Mantra

Smart Money to soon Buy Gold out of a Combination of Greed & Fear

Smart Money to soon Buy Gold out of a Combination of Greed & Fear

Smart Money to soon Buy Gold out of a Combination of Greed & Fear

As “fear trade” is dwindling down and the old-guard investors are stepping back, the new generation is buying gold to “make money” rather than to hedge against risk, said one precious metals expert.

“We advise investors to buy gold and silver out of a combination of greed and fear,” the managing director of CPM Group Jeff Christian told the Korelin Economics Report on Monday. “But, the fear factor is relatively low in our view. And the real thing is — let’s make money here.”

Christian doesn’t deny the existence of “fear trade,” stating that people still purchase gold and silver as an insurance policy.

But, the new trend that CPM Group described is investors “coming in and saying that they want to figure out how to make money [by buying gold],” Christian noted. “We are seeing a combination of factors driving these guys that we haven’t necessarily seen with investors in the past.”

This is a good change for gold, according to him, since the older type of investors are exiting the playing field.

“[There is] a lot of long-term gold bulls, who have either given up or died, and their heirs are going back to their brokers and saying: ‘Give me the money [back]’.”

The disappearance of the old guard is reflected in lower U.S. Mint’s coin sales of gold and silver American Eagles, said Christian. But, this is countered with increasing investments into ETFs, futures and options.

The new investors are “more opportunistic,” described Christian, adding that “a new gold renaissance” is on a way. “Our view has been that a secular upward shift in investment interest in gold is going to continue for many years to come,” Christian said.

One of the main drivers behind this positive shift for gold is the rallying stock market, which has been controlled by the bulls since 2010, according to the precious metals expert. “Smart money sees that and says that the stock market rally has to end and it will probably end badly,” he said. – Anna Golubova

Gold Shows Resilience In The Face of Stronger Dollar, Higher Yields

Although gold has fallen below key resistance, one market analyst said that he sees some underlying strength in the marketplace as the metal holds above important support levels.

“I am surprised that gold is not lower. In the current environment gold prices are holding up well,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Hansen noted that there is a long list of factors weighing on gold: the U.S. Dollar Index holding near a two-week high, 10-year real bond yields trading at a three-month high and stocks remain near record levels on strong corporate earnings.

Despite these bearish factors, gold has managed to hold above the October lows at $1,262.80 an ounce. “Something is going on in gold and it’s more than just what the headlines say,” he added.

December gold futures last traded at $1,277.20 an ounce, down 0.29% on the day.

Hansen said that geopolitical uncertainty, especially in the White House could be a reason why investors are reluctant to let go of their gold. While the Senate has passed important budget legislation, paving the way for Donald Trump’s much touted tax reform and tax cuts, the bill still has to be reconciled by the House.

“We really aren’t any closer to tax cuts but the market is gearing up for that. We could some disappointment if it doesn’t happen and that would be good for gold,” he said.

At the same time, The White House is also preparing to release its nomination for a new Chair of the Federal Reserve. One of the front runners is believed to be Stanford economist John Taylor, who markets are expecting to take a more hawkish stance on monetary policy. This is helping to support the U.S. dollar.

However, Hansen said there is uncertainty surrounding Taylor’s potential nomination. He also noted that any new leader at the Fed will have a difficult time altering the current path of interest rates.

“I think the Fed is starting to realize that inflation is not going to happen anytime soon and that will restrict the Fed’s decision,” he said. “The natural level of interest rates is lower than in previous cycles.”

As to how to play the gold market, Hansen said that current levels could be a good buying opportunity but warned investors to keep tight stops on their trades.

“If you are long gold then you should probably look at a stop around the $1,250 level. If gold falls to the $1,260 level then there is a good chance prices break below $1,250.” – Neils Christensen

Gold Trading Volumes Build-Up Massively

It was one of the coolest scenes in the Adventures of Superman show: Clark Kent ripping back his business suit to reveal the Superman outfit underneath while he sprints to save the day. Probably millions of people have seen that transformation.

Well, a similar transformation may be underway with gold, one that shows this market may be ready to fly…

I noticed a curious development in a gold chart from my regular readings, one the author only made a passing mention of. I hadn’t seen it highlighted elsewhere either, so I decided to do a little digging.

And sure enough, what I found is that unbeknownst to most investors, gold trading volumes on the COMEX just hit a record high.

Gold Trading Volumes Build-Up Massively

While virtually no one was looking, the amount of annual gold contracts traded on the COMEX reached a new historical high on October 20. With over two months to go.

You see that volumes both this year and last year are higher than 2011, when the gold price soared to an intraday high of $1,921. It was higher when traders dumped their holdings in 2013. And it’s already triple the levels of 2006. In other words, interest in trading gold has never been higher than right now.

To be clear, this data measures “trading” activity, so it includes both buys and sells. But the jump in volume both last year and this year is a bullish sign because prices have been rising. Gold was up 8.1% last year, and is up 11% so far this year. In other words, despite all the fretting about the drop in bullion sales, traders at the world’s biggest futures market are buying more gold contracts than they’re selling, a staunchly bullish indicator.

This dovetails with other bullish signs we’ve recently witnessed in the gold market, namely the spike in worldwide ETF holdings, which continue to hit record highs. The growth in the amount of holdings simply hasn’t let up…

  • Global gold ETF holdings have increased 7.7% so far this year.
  • Even when the gold price fell 2.9% in September, ETF holdings rose 2.4%, completing the third straight quarter of increases.
  • German-listed gold funds have skyrocketed since the beginning of 2016; holdings have more than doubled, now at 250 tonnes (8.03 million ounces).
  • And the Russian central bank has purchased 4.2 million ounces since January, worth over $5 billion and 15% more than in the same period last year. It’s been adding roughly 100 tonnes to its reserves every six months, more than any other central bank in the world, and now has roughly $73.6 billion in gold reserves.

Coin purchases may be down year-to-date, but this data clearly shows a growing buildup in interest for gold, particularly for professional traders and institutional investors since it is they who use these products.

Is the gold market about to shed its Clark Kent suit and turn into Superman? We’ll see, but it sure looks like he’s pulling back that first layer.

Either way, a major shift into the gold market is coming, folks. Don’t worry about the price, because sooner or later financial realities will set in around the globe and remind investors everywhere that gold is the one true monetary asset that can be trusted in times of turmoil.

In the meantime, I can tell you that we all at GoldSilver continue to prepare for the inevitable. Here’s what I just purchased. – Jeff Clark

 

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