You Sell 33 Tons, and What Do You Get, 7 Percent Down and Deeper In Debt

On the financial news yesterday was a dramatic drop in Gold prices. The report said that 33 TONS of gold has been sold in 5 minutes in China. At that moment, gold was down 7% on the day. Here’s a graph of that move. (Today is up ‘a tiny’ in rebound).

GLD 7% drop day

Notice the large spike in selling of GLD in those red volume bars both yesterday and the day before. That is only the GLD ETF and does not include any of the China selling nor any of the commodities exchanges volumes. It does indicate market linkage on price moves. I suspect the 33 tons was margin calls in China, that could not be met, forcing sales of whatever had value and could be sold (and since China has blocked selling of many stocks, some positions can not be unwound to exit them either).

On this chart, USDU is a $US bullish fund while I’ve also plotted the FXE Euro and FXB British Pound fx ETFs. It is interesting to note how gold generally tracks the Euro (i.e. not tracking the general dollar rise over the last year) and how the British Pound has minor “excursions” opposite the $US fairly consistently, while the Euro is generally running opposite the $US but in larger ranges. Similarly, gold often dips on $US rises and rises on $US dips.

It looks to me like folks are heavily using the $US as “risk off” trades against the other currencies and gold.

Also like there may be a lot of € / $ fx trading going on.

In theory, that large down spike in gold, along with a volume up spike, would be a ‘buy point’. It needs MACD to have “blue on top” crossover to confirm, but a “buy if touched” trailing order might also work well, given how volatile gold can be. Also of note that the ‘red line’ in ADX- is inflected (though on that deep a price plunge, just about inevitable for that line to look inflected on the first non-plunge day). So the MACD and DMI indicators are still saying “stay out”, while the “setup” is saying “maybe soon”… Frankly, given the market manipulations in China, and their dodgy numbers (what isn’t fake is not good) and the gross instability in Euro Banking what with Greece being a basket case, Italy frantically weaving their basket, and Germany licking it’s banking chops… I could see a lot more forced selling as possible. Given that the long term trend in gold has been down for a couple of years, I’m just not seeing the reason to go all “risk on” right now. MAYBE a very fast trade, but that’s on a 10 day type chart, not here.

So “interesting times”. Gold under $1000 / ounce. China trying desperately to keep a balloon with holes in it from deflating, and the Euro Zone trying to decide who’s banks to bugger and rob next. USA doing navel gazing as we try to decide which Clown is best for the Bozo In The White House role next.

Me? I’m indulging in the Greek Solution. Folks there are simply taking any currency they can find and spending it on stuff they want. Things in hand, now, future too risky to hope at. “And Hope is not a strategy. -E.M.Smith”

No sense trying to do long term investing in an insane world with thieves running the UN (and maybe Congress and The White House… or are they just “Thieves by proxy” for their ‘donors’?…)

No sense trying to trade much with Goldman Sacks et. al. working 100% against small “investor” interests, with computerized traders getting preferential execution, and with High Frequency Trading determining market movements and not individual people making rational investment decisions.

Sigh. It’s such a pain watching perfectly good markets get buggered by “government control”, special interest manipulation, insider dealing, and abuse of the public.

With that, back to your regularly scheduled life.

I’d likely care more about this all if I had more money at risk, had any gold to speak of, had anything invested in China, or thought any government could ever be anything other than a moral hazard and potential evil… and maybe thought that a financial service company meant any kind of service other than what bulls do on farms…

But those naive attitudes left the building long long ago. Now there isn’t any real “investing” for me, it’s mostly just a game of figuring out what dance the Elephants are doing and finding ways to exploit small spaces they don’t fit. For now, that looks like China Government doing a shakeout of China Investors by changing rules in the middle of play, China “investors” running for cover, big trading houses doing a Butt Cover, and The EU and USA Banks trying to hoover up any loose change left in any non-German non-French banks.

But it can be fun to watch…

Update: Added for P.G. Sliver vs Copper vs Gold vs Platinum

Since P.G. brought it up, here’s that chart:

Sliver vs Platinum, Copper and Gold

You can see that all are essentially in freefall and have been for a while. Platinum leading, silver and copper close behind, and all three similar. Gold a bit higher.

OTOneH, this isn’t that unusual. Platinum, copper and to medium extent silver are industrial metals. When economics is “not good” they drop. When economic demand is high, they rise faster. Gold has more use in jewelry, as a “store of value” and as an international money hedge (back when gold was dropped to $300 an ounce it was as some European Central Banks were dumping their gold… Spain IIRC… whatever the Central Banks do with gold, do the opposite…) plus gold has use in electronics.

OTOH, if the price one year ago was ‘parity’, Gold has more “down” to go to catch up. Now some of this is not the metals dropping so much as it is the dollar being “strong” (i.e. some idiots want it even though it’s a joke, it’s the best joke in town… likely in China to pay some margin demand or ??…) yet that still leaves gold as “too high”. IFF parity then was valid.

In metals markets, it is often the case that they plunge until high and medium cost producers are shut in. Then they do a small rise and plateau, while waiting for excessive demand in strong economic growth. THEN the metals shoot up, and even marginal producers restart the mines… that stay in production as prices top, roll over, and start to drop in the next economic downturn…

But this time we’ve had all the “pump and blow” we can get globally (Japan, ECB, and The Fed all near or at zero interest rates) and the economies have stayed near stagnant. (IMHO due to too much “regulation”, graft, taxation, and an aging consumer pool / labor pool along with “progressive” angst / stagnation policies). Let’s not forget truly massive debt burdens globally as well. More than can be calculated by anyone, IMHO. Sure parts can be figured (Federal Bonds, for example) but just what IS the global unfunded pension obligation level? Hmmmm?

So not as much demand build at one would expect, and fear rising, so prices falling. Except that gold gets a bit of a bid in ‘fear rising’ that doesn’t hit copper, and touches sliver and platinum only a little.

In short: Economic demand questionable, growth low to absent, “fear” trade modest at best, and some significant part of that fear leaning toward GTFOH (Get…OutaHere) on anything connected to banks and “investment banks”. Add China doing a Big Unwind with the Chinese government doing pot stirring of Epic Proportions and who knows what’s likely to happen. But “rising demand in robust economy” not in the mix.

With that, the end of the Update is reached.

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