Silence is Golden : Gold in the coming weeks

I have been silent on gold for some time now for I realise it has become an emotional topic even amongst friends, and it is not a subject for light hearted discussions with tempers fraying usually even before views are shared. One should imagine it is harder to talk about gold than religion these days.

There is no rush in the gold buy or sell trade, I would say, the charts say range markets between 1275-1425.

New developments in the past fortnight since the FOMC have some brave souls come out again on the gold case. This time Goldman says sell and JPM says buy. Of course JPM would have to buy, they have run out.

JPM’s buy call comes off the FOMC and gold as the Un-Taper trade on the basis of heightened inflationary expectations; that ETFs have mostly been unwound and increased physical demand from Asia.

Goldman still calls for gold at 1,050 although the Casey Research report alleges that Goldman turned long in the 2nd quarter (probably after the crash).

Keynes had called gold, or rather the gold standard, a barbarous relic for all the right reasons. Only the Indians and Chinese and now, the Turks and Thais are interested in it. I just read that Thailand is considering the launch of a gold exchange as the Shanghai Gold Exchange continues to dominate in physical deliveries (35 million oz out of global production of 44 million oz).

I wonder why the market is discounting all these news and the fact that Thailand is doubling its gold imports this year (, that is enough for the Bank of Thailand to voice concern that gold imports are being used to speculate on exchange rates and perhaps a need to regulate onshore gold forwards. (I have not been able to get more information on the BOT news and am relying on a Zerohedge newsflash)

Total physical gold coin and bar demand globally for 1H13 is running at 76% of the 2009-2012 annual average which is pretty high statistics even as ETFs saw massive withdrawals after the cataclysmic crash in April.

Source : World Gold Council

Market intellectuals wave these statistics off as ignorant buyers. Gold cannot do anything except waste away in a vault (yes, gold does decay and oxidise, even on its own so you will lose a bit of it over time) or be worn around your neck. The financial market continues to sell gold as a Taper proxy and as a risk off trade. Tired, disillusioned people are selling gold to buy stocks and real estate and bonds.

There is one thing I notice, however, in the past fortnight since the safe haven talk re-emerged after the FOMC and the debt ceiling fears (The EUR and JPY are deemed safe havens). It is that Gold is starting to exhibit a higher degree of correlation with EUR than ever before. Indeed Gold has the highest degree of correlation with EUR amongst all the other majors which is a rare event because Gold’s usual partners in crime would be AUD and the SAR.


EUR has shrugged off all risks in the past fortnight to take its place as the 2nd most important safe haven currency of the world despite all the whispers of Greece and Italy. Thus I am venturing to suggest that Gold, too will have her day and we should be seeing 1400 before not too long.

SSShhhhh. Don’t want people to get angry after they read this.