Seeking Alpha

Precious metals slump as stocks rally and QE nears end

  • As stocks put in maybe their best session of the year, precious metals have one of their worst, with gold off 1.4% to $1,244 and silver down 2% to $19.16.
  • Following yesterday's addition to the taper, BAML recognizes a pattern and says there's “a relatively high hurdle to deviating from this path." At the current rate, then, QE will be over by year's end. "All told, we read [the FOMC statement] as a marginally improved outlook."
  • Most surprisingly, the FOMC made no big changes to its forward guidance - i.e., the 6.5% threshold for hiking rates. Expect a shift to "more qualitative" guidance, perhaps as soon as the March meeting.
  • PM ETFs: GLD, SLV, IAU, AGQ, PHYS, SIVR, USLV, ZSL, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DSLV, DBS, DGZ, AGOL, DGLD, GLDI, SLVO, TBAR, USV, UBG
Comments (38)
  • filipo
    , contributor
    Comments (2727) | Send Message
     
    If they keep on tapering, who's going to buy the short- and middle-term debt ?
    I don't think a complete taper is sustainable.
    There simply isn't enough growth to erase debt.
    Besides, taper is highly deflationary. I'd like to see the housing market prices as soon as QE falls under < $25bn/month.
    Right now the markets cheer on good news that is the result of past stimulus.
    30 Jan, 03:24 PM Reply Like
  • 6151621
    , contributor
    Comments (1159) | Send Message
     
    myRA will do all the buying going forward -- gov't trying to follow the japanese model.
    30 Jan, 04:30 PM Reply Like
  • positivethoughts
    , contributor
    Comments (1809) | Send Message
     
    Government buying its own debt doesnt achieve anything. The Fed is the government.
    30 Jan, 04:37 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4499) | Send Message
     
    Many said the FED could never even "start" tapering,
    yet here we are.. wonder where "they" are now...
    30 Jan, 04:16 PM Reply Like
  • 6151621
    , contributor
    Comments (1159) | Send Message
     
    tapering is minimal when one considers they still reinvest coupons and they gots lots of those. And how they only started a couple weeks ago. I'd say we should defer the conversation until six to nine months from now and see how the tapering is going.
    30 Jan, 05:04 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (998) | Send Message
     
    Inventing new imaginary constraints on central bankers in their underground bunkers.
    30 Jan, 05:58 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8137) | Send Message
     
    Fear&Greedtrader:

     

    I am right here.

     

    Many said that gold would fall below $1100 by early 2014.

     

    I wonder where "they" are now...
    30 Jan, 09:42 PM Reply Like
  • JohnBinTN
    , contributor
    Comments (3573) | Send Message
     
    We haven't left early 2014, yet...
    30 Jan, 09:47 PM Reply Like
  • Tao Jaxx
    , contributor
    Comments (1273) | Send Message
     
    "they still reinvest coupons"
    Never did, never will. Check your basic facts. They pay these as dividends to Uncle Sam.
    What they do reinvest is the proceeds of maturing securities, otherwise their holdings would shrink.
    They will stop reinvesting maturing proceeds when they will be exiting QE, which will be the real "taper" of the stock of holdings, as opposed to the taper of the accumulating flow happening now.
    31 Jan, 12:58 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4499) | Send Message
     
    DVL,,

     

    noted, but it is Jan 31 , its still early , my friend :)
    31 Jan, 09:02 AM Reply Like
  • 6151621
    , contributor
    Comments (1159) | Send Message
     
    @Tao point is size isn't necessarily shrinking even if they add zero new purchases with reinvestment. Are you still short even in this sideways market?
    31 Jan, 11:31 AM Reply Like
  • Tao Jaxx
    , contributor
    Comments (1273) | Send Message
     
    Not only is the Fed balance sheet not shrinking. It is increasing by $65Bn a month, which means more than 8% a month of its pre QE size ($800Bn). Still short GC if that was your question, yes.
    31 Jan, 01:30 PM Reply Like
  • 6151621
    , contributor
    Comments (1159) | Send Message
     
    Yes, the balance sheet is expanding was my point with reinvestment. And the Treasury should owe FED coupons but then they can give it back since they created the money to buy the bonds from member banks in the first place.

     

    I'd worry about possible short squeezes in GC but since you were short for a long time, I guess it's not a big deal. Good for you.
    31 Jan, 01:47 PM Reply Like
  • ddearborn
    , contributor
    Comments (124) | Send Message
     
    Hmmm

     

    So according to the headline Gold and silver are "slumping" due to "QE nears end". IF that is the case why did Gold and silver "slump" for the last 2 years when QE was going full bore at well over 100 Billion dollars per month? The FED announced an additional reduction in the QE of 10 Billion per month. The FED did not state that QE was nearly over.

     

    So like so many other "headlines" covering precious metals, this one is 2/3's a lie. World Wide demand is already on pace to break the record breaking consumption of gold last year. And this with finite supply and dwindling production. Perhaps the author and this website would like to explain how it is that gold keeps going down in price? What happened to the rule of supply and demand? Let me guess there is a new rule: When it comes to gold and silver, no matter how high the demand, how low the production and supply the price will always go down as long as the dollar's value is tied to it. And of course no mention here of the unprecedented demand for delivery of physical gold by the likes of JP Morgan and host of elites around the world. Because after 7 years of the FED inflating the global supply of dollars by well over 30 Trillion anything else would be the end of the dollar. And right now the end of the dollar would mean the end of their rule. They are not quite ready to dump the dollar yet. But very soon now.

     

    Gold should be trading well in excess of $4000 an ounce and moving strongly higher every month. Common sense tells us that. So the question is; why are the likes of this website and much of the MSM constantly saying otherwise?

     

    Next they will be saying that gold is not a hedge for inflation and is therefore going to be worthless......Blah blah blah. And 2 airplanes brought down the towers at free fall speed into their own footprint and brought down tower 7 at free fall speeds into its own footprint in exactly the same manner without getting hit at all.....Good grief.

     

    Make the lie big, make it simple, keep saying it, and eventually they will believe it.--Adolf Hitler
    30 Jan, 04:16 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (998) | Send Message
     
    "They are not quite ready to dump the dollar yet. But very soon now."
    Been hearing this one for 5 years now.
    30 Jan, 06:01 PM Reply Like
  • omooc
    , contributor
    Comments (319) | Send Message
     
    ddearborn mentions, inter alia, that, as long as the price [of gold] is tied to the value of the dollar, it will always go down. I read, somewhere, that, when the value of the dollar strengthens, the price of gold goes down, and vice versa. It seems that the FED's reducing its purchase plan to $65b per month has a positive effect on the value of the dollar -- which then implies that it has a negative effect on the value of gold. Does this make any sense? omooc
    30 Jan, 09:41 PM Reply Like
  • filipo
    , contributor
    Comments (2727) | Send Message
     
    omooc,
    James Grant who used to deny Fed manipulation now changed his view:
    http://cnb.cx/1lp3gSJ
    31 Jan, 02:00 AM Reply Like
  • LEADER1
    , contributor
    Comment (1) | Send Message
     
    1971 Nixon took America off the gol standard.
    31 Jan, 06:46 AM Reply Like
  • jddc
    , contributor
    Comments (8) | Send Message
     
    this is a very important-point- several recent studies show just how hard it will be to abandon the USD as world reserve currency- the game is rigged so to speak -in times of crisis world assets flee to the US , and when the world is flush we are the largest logical absorber of these funds; add in the huge amount of dollars sloshing around in the world ranging from central bank reserves to drug dealers in cash, and there is a lot of stickiness to this system even vouchsafing dearborns comments. That said, this cant go on FOREVER, and while US will always remain an important currency for exchange/reserve for our lifetimes at least, its importance WILL be diminished progressievly-this is already happening with yuan, but chinas gdp will eclipse that of the US long before RMB replaces USD as leading world reserve currency- there is no way this black swan event happens before 2030 and it will be a glide path not a sudden rustrush o the exits- chinese are already tapering treasury purchases, but even iff they made the decision to exit completely there is no way they could unload total portfolio for teh more likley 20 years...and don't forget the japanese they hold huge amounts of US treasuries -they are unlikley to unload as long as they depend upon US for security vs resurgent China
    31 Jan, 11:59 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8137) | Send Message
     
    A black swan for the dollar will likely come before 2020.
    What happens to the dollar when 10 Year Treasuries are yielding 6%?
    Think about the portfolios of institutions world-wide that purchased U.S. bonds yielding <~3%.
    Trillions in outstanding debt will mature before then.
    Bondholders will expect to be paid in USD.
    31 Jan, 03:19 PM Reply Like
  • brucerappaport
    , contributor
    Comments (8) | Send Message
     
    Well said.
    30 Jan, 05:13 PM Reply Like
  • a@b.com
    , contributor
    Comment (1) | Send Message
     
    Gold will be $2000 by the end of Obama's term.....when we have to pay the piper!!!!
    30 Jan, 06:08 PM Reply Like
  • solarcircle
    , contributor
    Comments (282) | Send Message
     
    ddearborn, well said and exactly true.
    30 Jan, 07:19 PM Reply Like
  • Brian58
    , contributor
    Comments (95) | Send Message
     
    ddearborn: you are absolutely correct. The manipulation game is almost over. COMEX is 112-1 leveraged with 400T left in inventory. Friday is the Chinese New Year's and Feb is the largest inventory draw. The game ends soon.
    30 Jan, 07:26 PM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Buy gold , the trend is up........don't be fooled !
    30 Jan, 07:29 PM Reply Like
  • NadgesNokindo
    , contributor
    Comments (45) | Send Message
     
    The masterminds at the Fed have had their cake and ate it too.

     

    They exported inflation during QE to minimize the threat of inflation at home while bailing out their banks (knowing that the majority of dollar reserves are off-shore).

     

    Now, as the banks become solvent again (raising hoards of cash on asset bubbles), the Fed can step aside. Happily, the demand for treasuries comes directly from those stressed countries for whom witnessed the actual inflation.

     

    BRILLIANT!

     

    I wouldn't touch gold/silver with a 10-ft pole.

     

    Never bet against the Fed.
    31 Jan, 08:03 AM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Buy gold , don't be fooled.....the trend is up......buy nugt !
    31 Jan, 10:07 AM Reply Like
  • NadgesNokindo
    , contributor
    Comments (45) | Send Message
     
    That's just hope, my friend. Not science.

     

    Gold is not monetary.
    31 Jan, 10:19 AM Reply Like
  • 6151621
    , contributor
    Comments (1159) | Send Message
     
    @Nadges, gold is not money in the US by fiat. We are supposed to put full faith and credit in US. Yeah, that's better than gold long term. I guess it's all relative. Argentinians are desperate for dollars now. I guess much better than their peso. This may not be true 50 years from now.
    31 Jan, 02:01 PM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Not hope my friend look at the chart !
    31 Jan, 11:23 AM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Nugt ....... Resistance 41.60...... next !stop
    31 Jan, 11:23 AM Reply Like
  • 6151621
    , contributor
    Comments (1159) | Send Message
     
    Nugt won't trade too well on technicals, I'd recommend following gdx even if you are long nugt.
    31 Jan, 11:33 AM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Nugt up 31 % for month.....gdx is up10 % ????
    31 Jan, 03:57 PM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Like I said ....nugt next stop 41.60
    3 Feb, 12:15 PM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Next Resistance 45.91 on NUGT
    10 Feb, 12:51 PM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    Nugt ....next resistance 55:13..... The gold train is leaving the station
    11 Feb, 11:47 AM Reply Like
  • NadgesNokindo
    , contributor
    Comments (45) | Send Message
     
    I'll be convinced at 1400 for spot. But good luck until then.

     

    Hope you have some physical, because when it comes time to redeem your winnings, it will be for worthless paper.
    11 Feb, 01:07 PM Reply Like
  • Johnny b 1889
    , contributor
    Comments (20) | Send Message
     
    If you really believe it will be worthless paper then you better bunker yourself and your gold cause blood will flow on the streets
    11 Feb, 03:05 PM Reply Like
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