Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
This site uses Akismet to reduce spam. Learn how your comment data is processed.
Editor's Note: Normally, you'd have to be a paid up member of the Money Map Report to get this alert, but Keith didn't want anyone to miss out on this rare buying opportunity. It's true that gold sank to multi-year lows yesterday, but the story you're being told isn't the whole truth. Keith wants you to know what's really happening – and why it's great news…
The official story is that raw materials are losing their luster in recent weeks amidst signals from the Fed that it's going to raise rates. The theory is that higher borrowing costs reduce the incentive to buy commodities by making them less attractive versus interest bearing instruments like bonds and equities that pay dividends because of the lost opportunity cost.
That makes sense but, as usual, it's not the whole story.
For that you've got to look east to China where traders staged a classic "bear raid" Monday night to capitalize on low liquidity conditions created while Japanese markets were closed for Umi no hi, or Ocean Day, in Japan, a national holiday.
It's Called a "Bear Raid," and Here's How It Works
Now, a bear raid is a highly technical tactic often used by large institutional traders. The goal is to create windfall profits though short sales and futures contracts.
If it works, the targeted stock, bond, currency, or – in this case – commodity plunges, allowing the short sellers to buy back shares they've borrowed and sold earlier at a huge discount. Typically, the sellers work together to establish a massive sale that overwhelms buyers and inflicts huge losses on anybody who's long.
In this case, traders took advantage of the fact that Japan's markets were closed for a national holiday. They knew full well that, absent their money, there were even fewer buyers than usual to mount a defense.
And what a move it was!
More than 3 million lots traded on the Shanghai Gold Exchange; a normal day is less than 30,000 lots by comparison. Anybody who tried to hang on got clobbered.
As for what's next… that's the interesting part.
Traders took prices below $1,130 which was previously regarded as solid support. This strongly suggests that there's more selling to come.
So, far from being a one-day crash, this could represent one of the best gold-buying opportunities of the year.
To learn how to get the Money Map Report for yourself, click here.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.
GOLD AS PET ROCK
Wall Street Journal columnist, Jason Zweig, recently penned an article referring to gold ( in this bear market ) as a "Pet Rock" held only on hope of a distant, future recovery to the glory days of $1900/ounce. Actually, with this recent downward momentum, its headed for $900 or so. At that point, I would be interested in more physical gold IF I can get any at the bottom. Otherwise, maybe only "pet rocks".
Gold as a monetary instrument has always gone on long trends, oth ups and downs. In the old days that was due to South Africa. When the price was high, they opened more deep mines that are extremely expensive to run, especially since the wage hikes for the minors. That reduced their output and, since they were by far the largest producers of gold, that meant an extended bull run since production never matched demand, Conversely, when the price was low, the deep mines lowered output (or were put into storage) and they reprocessed their tailings in and around the mines, especially Jo'burg. They no longer dominate production but the trends still remain.
Also remember that the dollar is quite high (and overvalued) and that depresses the gold price. Gold has fared far better in Euro terms and most other currencies.
James Rickards believes a strong spike is imminent, and that it will coincide with a world wide crisis and he believes it may even come this year. His arguments are well thought out but fail to take into account the willful blindness of the public. It takes a long time for the public to admit the emperor has no clothes. When (if?) they do it will be Katy bar the door. Gold is an insurance policy. I buy a certain amount and store it. If it falls below a certain percentage of my holdings, I accelerate my buying. Above a certain amount, I stop buying. I treat silver, palladium and platinum the same way. But I never sell the metal. If I want to trade, I use the futures market.
They are insurance policies that have a predictable expense. If nothing happens they will still have value, if something bad happens you will be happy to have them on hand.
Just my two cents.
09-08-2015.
hello friends.
i want to know about the gold price is that possible that gold price will go down up to
a 1000/= $ (usd) mark bellow? thanks for support.
best regards- chatrabhuj hinsu.
thank you.
It is possible. Some (Paul van Eeden for example) believe it will reach 750. For that to happen many things must fall into place. I believe that it will NOT fall that far because I believe the dollar will (and should) retreat from its very high levels. That will support and probably raise the price of gold. Such a decline is, in my mind, possible but not probable.
A decline to 1,000 USD is more likely. Especially since governments view gold as a competing currency and do everything they can to keep the price down.