The gold (GLD) market has been quite volatile lately, with prices moving erratically on little to no news. As it stands, gold prices are down over 25% from their peak in September 2011, yet the debate over the future for the yellow metal has never been more heated. While we did briefly believe that the initiation of QE3 would be a positive catalyst for gold back in September 2012, the fizzle out and complete lack of follow-through after this extremely bullish development caused us to question gold. Considering its performance since, we feel vindicated in our recent short gold call, and are now more confident than ever that the future for gold is bleak. Depending on the surrounding macro environment, we could see an environment where gold hits $1,000 or below within 2 years.

The Rise and Fall of Gold

To start with, let's view the price of gold in

The last week's action in precious metals was sensational, with gold (GLD) and silver (SLV) dropping by 2.82% and 4.65%, respectively. Platinum and palladium (PALL) suffered even worse fates, as we predicted. The coming weeks' action in precious metals is getting murkier, as short positions on gold have skyrocketed, but we believe the longer-term trajectory is now downwards due to gold ETF withdrawals.

The following chart shows Managed Money gross short positions on gold.

(Click to enlarge)

As can be seen, not only did gold gross short positions rise to a new record, they actually rose by nearly 20,000 contracts (or $3.1 billion in dollar terms) in just 1 week. It is clear that the futures market is skewed towards the short side, but that does not necessarily help us make a contrarian buy call as easily as it would be in other futures-traded commodity markets. While futures

The precious metals complex is getting interesting once again, with gold (GLD) and silver (SLV) falling 3.4% and 5% last week, respectively. While we continue to be bearish over the medium and long term (anywhere from six months to a few years), the gold market may be oversold in the near-term. In the short term, a preponderance of short sellers in gold leaves the metal vulnerable to a short-covering rally, but in the long-term, the metal has shown a startling inability to respond to the most positive of stimuli. Because precious metals are a psychologically-driven asset class, we believe gold's inability to respond to QE by the Fed and other liquidity programs is indicative of waning interest in the metal.

The following chart shows gold.

(click to enlarge)

As can be seen, gold is following a nearly perfect down channel since September 2012. On Thursday

The precious metals market is attracting much attention, but for the wrong reasons. Over the past few weeks, gold (GLD) has tumbled again and again, hitting as low as $1,626 before finishing the day near $1,655 on Friday. While we were excited about gold's potential after the game-changing QE3 announcement, we see little other choice than to recommend selling gold here, and for aggressive investors to think about taking short positions.

The primary reason for our change in recommendation is gold's counter-intuitive response to positive stimuli. When QE3 was announced, we were excited by the prospect of a new bull run in gold predicated by the essentially unlimited printing of dollars. Due to the QE3 announcement, gold ran up nearly $75/ounce to just below the critical resistance level at $1800. However, since then, the metal has done nothing but fall. A chart is shown below.

(click to enlarge)

As can

Long-time followers of ours on Seeking Alpha will know that we have been bearish on gold (GLD) ever since it hit $1900/ounce in August 2011. After today's shocking FOMC announcement, we are now long gold for the first time in a year.

Our primary concern about gold over the past year has been lack of expansion of the Fed balance sheet, leading to broad US dollar strength over the past year. The following chart shows the Fed's balance sheet in white, the ECB's balance sheet in orange, the BOE's balance sheet in purple, and the BOJ's balance sheet in green.

(click to enlarge)

As can be seen, for over a year now the Fed balance sheet has not changed in size, while every other major central bank in the world has expanded their balance sheet with reckless abandon. This slowly supported the dollar, leading to a 12.5% rally in the

The precious metals have been a huge area of interest for us at The RealFinance Newsletter, as well as institutional and individual investors around the world. With the price of gold (GLD) rising 642% from March 2001 to August 2011, investors have been enamored with what seems like a can't-lose investment. However, the fundamental outlook for gold changed drastically starting in September of last year, and not only has it not gotten better, it has deteriorated substantially.

The following chart shows the price of gold over the past 5 years.

(click to enlarge)

As can be seen from the price action, ever since last year's late summer catapulting of gold into bubble territory, then its collapse in September, the precious metals have been a tortured asset class for players looking to go long or short. Prices have been caught in an amazingly well-defined downward triangle for over a year

The U.S. equity market continues to defy critics and rally on, closing last week above 1400 for the first time since May. Along with high stock prices, the VIX VXX index closed Friday within striking distance of its lowest levels over the past 5 years. Asset prices and especially volatility prices are telling us that there is little to no fear in the market presently, which means that contrarian timing appears highly favorable to the placement of bearish trades.

Shown below is a chart of the VIX over the past 5 years.

(click to enlarge)

Surprisingly, the VIX is down over 3.5% as of Monday despite markets trading down significantly. If the VIX were to close at its current level of 13.98, this would be the lowest close on the VIX since June 2007. The fact that the VIX is at the lowest point since the peak of debt-fueled excesses

As we indicated in an article a few weeks ago (here), we believed Apple (AAPL) had lost momentum after its enormous rise to begin the year. We turned about to be about three weeks too early (although the stock only advanced about 5% in that time span), but it appears as if the decline in Apple may be beginning, and given Apple's impending earnings announcement, an options trade to take advantage of the high implied volatility of the stock could be profitable.

Since hitting $644/share on April 10th, the stock took a quick nosedive, declining even on days where the stock market rallied broadly, hitting $571.91 yesterday. Of course, after the stock opened at this low level yesterday, it experienced an extraordinary intraday rally that took the stock all the way up to close at $610, rising nearly $40 between the open and close. Today, the

As we have recommended for weeks (here), we are no fans of precious metals at these prices. The past couple of days and weeks since February 29th have been rough for gold (GLD), and consequently for all precious metals, and we expect more of the same to continue.

The market is finally waking up to the fact that the Fed has no options on the table. With economic optimism already extremely high, and some data points confirming, the Fed has no scope to ease policy whatsoever.

At the same time, given the still-depressed nature of housing and employment, the Fed also has no ability to tighten. The Fed is hamstrung at the present time, and until such time as a drastic downward move in asset prices or a dramatic upward move in the Main Street economy, Fed action will be little more than verbal rhetoric. Given

One thing is for certain: The market cares about Apple (AAPL). The bearish article we posted on Apple stock on Monday received quite a bit of attention, and fervent arguments on both sides. Moreover, when Apple stock started suddenly declining toward the end of today's session, it took the entire stock market with it. The Apple options market seems to reflect this fever pitch.

Apple Options

Shown below is a chart of Apple put options traded in white, and call options traded in orange.

As can be seen, the options volume on Apple is absolutely enormous, with an astonishing 1.3 million call options traded on March 14th. This means that the call options traded on just March 14th alone are enough to change ownership of 13.9% of the entire company, the largest in the world.

We frequently use volume, price action and other technical-type observations to gauge positioning and

This week started with important fundamental news on one of our most recent trade recommendations for our newsletter subscribers, Apple (AAPL). Overnight, it was announced that Apple would host a press conference this morning before the market opened to discuss its cash usage. This morning, Apple announced a $2.65/share quarterly dividend, as well as $10 billion in share buybacks.

While many investors were waiting for such a seminal moment for Apple stock, predicting that the payment of a dividend would open Apple to a myriad of investors, it is unclear whether the announcement will be a downwards or upwards catalyst going forward. While Apple traded as high as $607.50/share pre-market, shares have been coming off a bit as soon as the market opened. For the regular trading session, Apple has not surpassed the $600/share mark it saw last week.

The $2.65 quarterly dividend is good for a 1.79% dividend yield

Yesterday's action across markets was very interesting, as markets opened higher on the back of decent economic data in the U.S. and Europe. However, precious metals were one of the most interesting trades all day, and we believe there is significantly more action left to occur.

Fundamentals

Our longer-time readers will know that as recently as summer 2011, we were staunch precious metals bulls. In fact, we have been bullish gold (GLD) since 2008. However, the parabolic run-up of August and September caused us to reverse our position, and in so doing, we caught quite a bit of the downward move in gold during September's large sell-off by shorting both gold and silver (SLV) futures.

What is scary for gold is that fundamentals for precious metals have become markedly worse, not better, since then. The following chart shows the balance sheets of the four largest central banks in the world.

Gold was the headline-grabber of the week, dropping almost 7%. Longtime readers of The Commodity Analyst know that we have been bearish on gold for quite some time, but even we were surprised by this week's move. Nevertheless, we see further downside.

The following chart shows the price of gold in yellow and Managed Money net longs in blue.

Chart courtesy of 12/19 Commodity Analyst Newsletter .

While Managed Money interest is certainly not extremely high, it is also not necessarily very low. While Managed Money longs most likely dropped a good amount after Tuesday (when the CFTC report is accurate until), gold Managed Money longs are nowhere near the lows seen in 2008, when the metal fell and washed out many weak long holders before moving higher. Furthermore, the red trendline of gold's uptrend since 2008 appears to be on the verge of being broken. This upcoming week could

The European situation continues to evolve into a nightmare. From anecdotal evidence, it appears that the ECB needed to step in and buy bonds each day this week to prevent a complete meltdown. Even still, European bonds had a rough week overall.

The following charts show this week's action in Italian, Spanish, and French 10 year bonds.

Chart courtesy of 11/21 Commodity Analyst Newsletter

Chart courtesy of 11/21 Commodity Analyst Newsletter

Chart courtesy of 11/21 Commodity Analyst Newsletter

All three countries were under heavy selling pressure this week, causing the ECB to step in at multiple junctures. To highlight the fever pitch of the action, Thursday's chart tells the European debt story. The ECB bought bonds, in a presumably very large size, directly before debt auctions by Spain and France. The ECB tends to concentrate their bond buying immediately preceding debt auctions because they are trying to

Crude oil has recently disconnected from the rest of the risk asset complex, continuing to rise another 8% after October 27, even after the euro, Australian dollar, and equities all peaked. Contributing greatly to crude oil's rise was the rumor and eventual news of the reversal of the Seaway pipeline, opening a direct line of transport between Cushing, OK., and the Gulf of Mexico.

Such a development is important fundamentally because accelerating oil production in the Bakken shale in North Dakota, as well as Canadian production was becoming bottlenecked in Oklahoma, causing WTI prices to come under pressure even as Brent crude prices stayed fairly stable. This phenomenon caused WTI crude to trade at a record $27 discount to Brent on October 14. Since then, the spread has narrowed all the way to $10, hitting a low of $9.29 on Wednesday.

While the Seaway pipeline should help alleviate the inventory

The ECB had to again buy sovereign bonds in the secondary market this week to calm investor fears about Italy's insolvency. However, the more bonds the ECB buys, the less liquidity there is in the sovereign market and the less confidence investors have in the sovereigns. Shown below are charts of the Italian and Spanish 10 year bonds.

-chart courtesy of The 11/15 Commodity Analyst Newsletter -

-chart courtesy of The 11/15 Commodity Analyst Newsletter -

As can be seen, Italian yields went absolutely parabolic on Wednesday of last week, rising to an astonishing 7.5% before ECB buying on Thursday and Friday drove them down to 6.5%. However, yields rose back up to 6.7% Wednesday as the ECB stepped away. Interestingly, while the Italian bonds at least showed a respite from selling for 2 days, the Spanish bonds did not.

As many have surmised, speculators and

The past week was packed with fresh concerns over Greece, combined with renewed ECB Italian bond purchases and RBA and ECB interest rate cuts and that only got us to Thursday. Despite the relative strength of equity and risk markets, the economic situation here in the US and abroad is tenuous at best, and we believe the next few months will turn fears of renewed recession into reality.

The following charts show the CRB Raw Industrials as well as the GSCI Total Return index.

Chart Courtesy of 11/04 Commodity Analyst Newsletter

Chart Courtesy of 11/04 Commodity Analyst Newsletter

As can be seen, the CRB RIND continues to show no signs of rallying despite the GSCI index as well as the S&P 500 remaining at elevated levels as compared to early October. This ongoing situation is consistent with our view that the global economy is suffering from a lack

The past week saw the third straight weekly gain for the S&P 500, as well as a continued rally of the euro. Markets continued to cheer each and every rumor emanating from Europe with yet more buying of risk assets. We continue to remain bearish, as none of the proposed solutions in Europe will come close to solving the real problem, which is overindebtedness and an overvalued currency.

The following charts show the CRB RIND as well as the GSCI Total Return Index. Click on all charts to enlarge:

-chart courtesy of 10/21 Commodity Analyst Newsletter -

-chart courtesy of 10/21 Commodity Analyst Newsletter -

As can be seen, the CRB RIND has not rallied with the market despite risk assets taking off in the past few weeks. In fact, Thursday saw the CRB RIND hit a new 1-year low, falling over a full percent on the day.

The past week saw a massive rally in risk asset prices. Since the bottom on October 4th, the S&P 500 is up 14%, the Nasdaq 100 up 16%, Brent and WTI crude up 16%, and copper up 15%. To be sure, risk asset prices experienced their strongest rally since the rally off of the March 2009 lows.

However, in the same time period, the CRB RIND rallied only 1.1%. The following charts show the CRB RIND and the GSCI Index.

Chart courtesy of The 10/14 Commodity Analyst Newsletter -

Chart courtesy of The 10/14 Commodity Analyst Newsletter -

As can be seen, the GSCI Index has experienced the same massive rally as all risk assets, whereas the CRB RIND has barely responded. This is of particular interest to us, as this would seem to suggest that speculators are getting ahead of actual commodity demand.

To illustrate this,