Seeking Alpha

Carlton Chin, CFA's  Instablog

Carlton Chin, CFA
Send Message
Carlton Chin, CFA, is Managing Director, Portfolio Strategy & Research at Price Asset Mgmt (PAM) and portfolio manager and head of research for ADAMAH Capital, which specializes in Computer Aided Research & Advanced Technology (CARAT). He is a specialist in quantitative investment... More
My company:
Price Asset Mgmt & ADAMAH / CARAT Capital
My blog:
Z-Trader
My book:
Baseball + Numbers = Fun & Games
  • Gold Continues Sell-Off 4/15/13 0 comments
    Apr 15, 2013 9:09 AM | about stocks: GLD, GOLD, GSG, GSPC

    Gold continued the extreme sell-off it saw on Friday, when it dropped from about 1565 to 1500 (basis the June 2013 futures contract). Over the weekend and into the New York opening on Monday, April 15, 2013, gold is seeing a breathtaking drop to the 1400 level. This drop of about 10% shows why traders often have risk management approaches in place and act first -- and ask questions later. Gold is now at two-year lows (at the lows of 2011 and 2012).

    In futures trading, trend-followers are often seen as "reactive" -- but technical traders who follow trends have also seen their approaches be "predictive." Other precious metals such as silver and platinum, and related markets such as the Aussie dollar are also selling off in sympathy. In fact, many other commodities are also lower, including grains and the oil complex. The Rogers International Commodity Index and GSCI are all materially lower today.

    More on the technical selling from the CME:

    The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract (see below) in what proved to be only an opening shot. The selling took gold to the technically very

    important level of $1540 which was not only the low of 2012, it was also seen by many as the level which confirmed the ongoing bull run which dates back to 2000. In many traders minds it stood as a formidable support level... the line in the sand.

    Two hours later the initial selling, rumoured to have been routed through Merrill Lynch's floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading. This was clearly not a case of disappointed longs leaving the market - it had the hallmarks of a concerted 'short sale', which by driving prices sharply lower in a display of 'shock & awe' - would seek to gain further momentum by prompting others to also sell as their positions as they hit their maximum acceptable losses or so-called 'stopped-out' in market parlance - probably hidden the unimpeachable (?) $1540 level.

    The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact. The estimated 400 tonne of gold futures selling in total equates to 15% of annual gold mine production - too much for the market to readily absorb, especially with sentiment weak following gold's non performance in the wake of Japanese QE, a nuclear threat from North Korea and weakening US economic data. The assault to the short side was essentially saying "you are long... and wrong".

    Read more here:

    http://www.cmegroup.com/education/market-commentary/metals/2013/04/pre-open-gold_3564.html

    And why is gold selling off? Some say it is the result of China's latest round of economic numbers (China GDP), and others report that stories of Cyprus selling gold reserves (related to the Greek crisis) is hitting the gold market.

Back To Carlton Chin, CFA's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.