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Gold’s decline and why it’s happening

Cory
August 24, 2016

This morning with Chris we focus on the decline in the price of gold and why it is happening. Even though gold is still comfortably above $1,300 there has been a general pullback from the highs reached in early July. We also touch on a story out of ZeroHedge which showed $1.5 billion of notional gold dumped on the market earlier today – click here for the article.

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Discussion
35 Comments
    Aug 24, 2016 24:22 AM

    Notional BS(bullion sales)…..

      Aug 24, 2016 24:26 AM

      Little Greenback men running around ,looking for a Jackson Hole to jump in….

        Aug 24, 2016 24:32 AM

        Thanks CT. 🙂

    Aug 24, 2016 24:36 AM
    Aug 24, 2016 24:40 AM

    Really need term limits ….and elimination of the Central Banks. Then all little green men could get jobs at the mental wards watching over Xbankers

      Aug 24, 2016 24:42 AM

      Of course that would exclude Big OWL

    Aug 24, 2016 24:59 AM

    Great comments Chris. I always appreciate your sensible approach and in gold’s current case I especially agree caution is warranted. You mentioned three strikes that were all important.

    I will add another if you don’t mind.

    Gold, silver and platinum have all hit the upper boundaries of their falling trend channels on a monthly basis. Check any monthly chart to see what I am referring too. It is perhaps the biggest red flag out there right now and keep in mind that unless (and until) they break out of those declining trend channels they are ALL still officially in the bear market that began in 2011.

    That’s why we saw the dumping of a billion and a half notional paper gold contracts and its why this decline is a long way from over on the downside as this sell off is just getting underway. We have convincing megaphone formations on platinum and gold that are so far proving that pattern is both valid and in play.

    Like you I would be very careful trying to pick a bottom as the next buying opportunity. Gold should fall just below 1200 at a bare minimum but could go a lot lower. Buying dips is for dips in my books.

    We shall see what the next Fed meeting brings. Who knows, they might just pull the rug and put a fork in this big bear market bounce.

      PF
      Aug 24, 2016 24:55 AM

      Birdman, how low do you think silver could fall to?

        Aug 24, 2016 24:09 PM

        Around 17 and a quarter at a minimum. That’s my base landing point but it should go lower. We will know more once we get there.

        Aug 24, 2016 24:26 PM

        A 50% retrace of the entire move since January btw would get us to 17.50 or something like that (without getting too precise and mathy about it) and that would make a great place for a fairly solid bounce. Its not that far away from where we are right now either so its not a crazy estimate by any means given how fast its falling.

      Aug 24, 2016 24:25 PM

      It has been time to get out for a while. Gdx went up 2.5 times without a correction. Last one out please shut the lights. 1220 to 1250 could be a target.

    Aug 24, 2016 24:01 AM

    Thanks Chris and Cory – very measured comments as always. Ms Yellen getting more hawkish, I think not. Talons wrapped in cotton wool more like, as she remains Obama’s glove puppet right to the end.

      Aug 24, 2016 24:12 AM

      More like Obamy golf club cover

        Aug 24, 2016 24:16 AM

        Wonder if Obamy will get invited back to Martha’s Vineyard after leaving office.

          Aug 24, 2016 24:09 PM

          Not if Trump gets in. The empty suit will fit nicely into a prison cell.

    Aug 24, 2016 24:07 AM

    News…..Existing home sales down 3.2%….lowest rates in history ,and sales are down …and Fed is going hawkish…..like duh.

    Aug 24, 2016 24:26 AM

    If there is any way you can make your links shareable to telegram I have friends who would enjoy the podcasts …who are not on fb

    Aug 24, 2016 24:16 AM

    Bob Moriarty sums it up nicely “If you don’t learn to take profits when you have them,the only other alternative is to take losses when you have to”
    https://www.youtube.com/results?search_query=bonanza+eifel+tower

      Aug 24, 2016 24:46 AM

      +1

        Aug 24, 2016 24:52 AM

        A zombie financial system, black swans and a gold share correction
        The Gold Report | about an hour ago

        “Bob Moriarty of 321Gold says that since the crash of 2008, the financial system has become a zombie, and he urges investors to pay attention to when they take some money off the table…”

        “I’d love to see a full-blown correction. The boat is getting way too crowded with everyone on the same side of the boat. Gold shares, silver and gold are leading the correction lower. The XAU (Philadelphia Gold and Silver Index), the HUI (NYSE Arca Gold BUGS Index), silver and gold all set at least a short-term high in the first week of August.”

        “I’ve sold a couple of thousand copies of my book. Many readers feel that the chapter on taking a profit is the single most valuable chapter in the book. Lots of my readers have made hundreds of percent on gold and silver shares. Have a plan. If we are going into a massive correction, it will be the single best time in your lifetime to invest in resource shares. But the XAU and HUI could be down 40% or more. Have a plan. Either sit on your hands until it ends and ride it out or take some money off the table. Now would be a good time to be cashed up. Remember, nobody ever went broke taking a profit.”

        http://www.mining.com/web/a-zombie-financial-system-black-swans-and-a-gold-share-correction/

    Aug 24, 2016 24:46 AM

    Gold price drop sinks mining stocks
    Frik Els | 5 minutes ago

    http://www.mining.com/gold-price-drop-sinks-mining-stocks/

      Aug 24, 2016 24:55 PM

      That is good news for anyone that has been waiting for a pullback to buy more shares in the companies on your wishlist.

        Aug 24, 2016 24:56 PM

        I’m waiting to see how the week closes out and how it opens next week to see if this is just a smaller dip, or if it does turn into a larger correction in the metals and miners.

          Aug 24, 2016 24:40 PM

          I like your thinking Shad.Hmm maybe because I was thinking the same thing.
          Seems we always go through this when the Head of the Fed Reserve is do to speak.
          One must sit back and ask yourself what was the catalyst that got us here and what has changed?
          The quants are easily moved during the short term.
          The macro economic picture looks the same as yesterday.This feels like noise, but I guess we’ll find out with Monday’s close.

            Aug 24, 2016 24:08 PM

            Agreed. It’s the Fedbabble Factor. Waiting for the dust to settle…..

    CFS
    Aug 24, 2016 24:38 PM

    Maybe I’m just getting old.

    But I hear Mr. Temple about “taking chips off the table”. Does he believe we have changed to a bear market in PM stocks?

    I was always taught, back in the dark ages, of course, that for corrections you buy put options; you hold on to stocks until the secular trend changes.

    in a bear market one should be generally short stocks, and then you buy call options for protection against trend reversals.

    In current times many people seem to believe in using leverage and guessing right all the time. That is a sure-fire way to end up broke, even if you manage to guess right most of the time.

      Aug 24, 2016 24:13 PM

      Another option is not to completely sell out, but to just trim back winning positions some, in effect taking some chips off the table, but still leaving a core position in place for exposure to further upside. If the stock or ETF pulls back 15% add, if it pulls back 20-30% add more.

      If it truly is a Bull market then buying during selloffs with the money you trimmed on rallies is money well invested, because eventually the bull market will lift that equity again.

        Aug 24, 2016 24:45 PM

        +1 Re: “If it truly is a Bull market then buying during selloffs with the money you trimmed on rallies is money well invested…”

        Those who do that will find themselves rooting for the bears on days like today. I was.

          CFS
          Aug 24, 2016 24:10 PM

          If we have another day like today a number of my trailing stops will kick me out anyway. At least I will profit from my puts to cover the losses.
          and since I still believe we are in a bull for another few years in PMs, I will be buying shortly after the correction ends.

            Aug 24, 2016 24:30 PM

            Yours is a great strategy for those with the know-how.

            Aug 25, 2016 25:50 AM

            CFS:

            It is a bull market, we had the lows in Dec, Jan, Feb. A big correction, maybe 40-45% of the climb would be perfectly normal. We need to squeeze out all the weak hands who climbed on the train at the last minute.

            But the end of the correction will offer the greatest opportunity in years to invest.

            Anyone who has made 200-300-400% on stocks who hasn’t taken some money off the table is going to lose it all. Having some cash when a big correction comes is just really good sense.

        Aug 25, 2016 25:41 AM

        Yes, Excelsior, THAT is what I was driving at.

          Aug 25, 2016 25:51 AM

          Thanks Mr T. It makes sense to me, and while it may limit some upside, it also limits downside risks.

    CFS
    Aug 24, 2016 24:45 PM

    with regard to the general market, Mr. Buffet’s favorite measure of valuation is value of all stocks relative to GDP. If we use that as a measure, the general stockmarket has to drop about 40% from its recent highs to get back to a median valuation, so it would not surprise me in the least to see a major drop there. Of course, the ESF, the Fed and the political establishment will try to not have that happen, since the stockmarket is generally taken as a barometer for the economy.

    Aug 25, 2016 25:31 PM

    Wow.

    Nobody is likely to read this comment, but I need to weigh in on Chris Temple’s comments about “conspiracy nuts” like Jim Rickards and such.

    Chris, I respectfully disagree with your opinions (although I don’t know that you show respect for those that you disagree with).

    Personally, I think that Rickards is talking about a reset coming sometime in the (near) future (possibly in a couple of years). So, to disparage someone who is looking out to potential outcomes of what is clearly a broken market is a little beneath you (in my humble opinion).

    I always enjoy your commentary Chris, so please don’t take my criticism to be too harsh.

    (By the way … I also disagree with your opinion on the gold price smack-down reported on Zero Hedge … Jesse is someone I always look to for wisdom and he agreed that this reeked with manipulation: http://jessescrossroadscafe.blogspot.com/2016/08/gold-daily-and-silver-weekly-charts_24.html )