After plummeting last year in an extreme once-in-a-lifetime orgy of selling, GLD’s holdings have remained stable all throughout 2014.
That’s despite the fierce headwinds of the levitating stock markets continuing to howl, and the recent gold sentiment wasteland of the summer doldrums. GLD holdings' resiliency is very bullish.
As these lofty stock markets inevitably sell off, stock traders will return to GLD. Their necessary GLD-share buying to re-diversify unbalanced stock portfolios will add big marginal gold investment demand.
Today's move - down 1.3% - pretty nearly makes it a summer round-trip for the yellow metal, which was around $1,260 per ounce on Memorial Day, rallied to $1,350 just after July 4, and finds itself currently at $1,278.
Up nearly 1% not long ago, Europe's Stoxx 50 (NYSEARCA:FEZ) is lower by 0.6%, led by Germany's (NYSEARCA:EWG) 1% decline after Ukraine says it wiped out a Russian military convoy. Germany's 10-year Bund yield carves out another all-time low at 0.965%.
An early U.S. gain is erased as well, with the S&P 500 (NYSEARCA:SPY) down 0.25%. The 10-year Treasury yield falls to a level not seen since May 2013, off six basis points to 2.34%. TLT +1.2%, TBT -2.3%
Down more than 1% earlier, gold (NYSEARCA:GLD) is now lower by 0.6% at $1,307 per ounce.
Wald thinks the Market Vectors Gold Miners ETF (GDX +1.6%) can soar more than 40% from current levels to his price objective of $38; GDX has finally broken out from a long-term downtrend, he says, suggesting a new trend of outperformance is underway.
The analyst considers GDX a top trade idea, and believe the ETF has a stronger floor and offers more upside opportunity than the SPDR Gold Shares (GLD +0.4%).
Among individual GDX components, Wald recommends Goldcorp (GG +2.5%), Randgold Resources (GOLD +0.4%) and Royal Gold (RGLD +2%).
The SPDR Gold Trust (GLD -0.3%) saw 11.1 tons of new gold last month, according to the Commerzbank team. Tossing in the iShares Gold Trust (IAU -0.3%) and the rest of the gold complex, about 15.7 tons came in, making it the largest monthly inflow since November 2012. For 2014 in total, tough, there remain net outflows to the tune of 30 tons.
Outflows have been blamed for mostly falling prices over the last year-plus, but July's inflows may have helped staunch an otherwise tough month for gold.
Unrest in the Middle East and Ukraine is failing to give a bid to gold which is off 1% to $1,291. Signs of economic strength maybe aren't helping, with China's PMI rising to an 18-month high and U.S. jobless claims falling to their lowest level since 2006.
Yesterday, Goldman reiterated its year-end forecast for gold of $1,050 per ounce, and the China Gold Association reported a 19% decline in gold demand in that country through the year's first half. “China bought too much last year and there’s significant stock built up onshore that will take some time to work through,” says ANZ's Victor Thianpiriya.
Signaling a likely move to an electronic platform, London Gold Market Fixing, Ltd - working on behalf of the gold-fixing banks HSBC, SocGen, and Scotiabank - launches a request for proposal process with a view to appointing a new administrator for the benchmark.
"It is sensible to say that based on the feedback received for the silver alternative, the reformed gold system will also be electronic, auditable and transaction-based," says a London Bullion Market Association spokesman.
After a meek attempt at a bounce, gold adds to Monday's major slide as Fed chief Janet Yellen testifies before the Senate and suggests rate hikes could come sooner than expected should the current trajectory of employment improvement continue.
Opining on Monday's 2.4% decline, Commerzbank notes a general decline in risk-aversion as evidenced by rising equity markets. Also noted is profit-taking after a big run higher for the metal and a buildup in long net long positions reported by the CFTC to their highest level in eighteen months.
Precious metals miners are broadly lower as gold futures head for their biggest daily drop of 2014, plunging $29.30, or 2.2%, to $1,308.10/oz.
Physical demand has remained short of expectations, Commerzbank's Eugen Weinberg says, and India's decision to maintain a 10% import duty on gold and silver likely will dampen future gold demand expectations from the country.
Barclays, which expects gold to drop to $1,200/oz. by Q3, also expresses caution, saying recent gains across the metals complex look toppy.
"The gold stocks typically begin rising or falling in advance of the metal, thereby foreshadowing the trend," Gold Newsletter's Brien Lundin says, adding that “they move further on a percentage basis than the underlying metal, thereby offering leverage.”
Lundin sees prices in the $1,400-$1,500 range at the end of the year, with prices continuing to strengthen in a “slow-but-sure” climb out of last year's steep correction.
Portugal's 4% decline today brings its 7-day dive to 11% as the parent of Banco Espirito Santo reportedly is considering bankruptcy protection. Banco Espirito is off 17% today and more than 50% over the last month.
Spain's IBEX 35 is down 2.4% and Italy's FTSE MIB is lower by 2%.
Gold is higher by 1.5% to $1,344 per ounce and silver by 2.4% to $21.58.
In other news, India disappointed gold bulls by leaving in place recent increases in gold import taxes in its just-released annual budget. The previous government over the last two years had boosted the import tax to 10% from 2% and mandated that 20% of imports had to be re-exported.
Stock futures (SPY, DIA, QQQ) remain little-changed, but the 10-year Treasury yield jumps to 2.69% from 2.63% following the strong June jobs report which saw payrolls gain 288K and the unemployment rate fall to 6.1%.
Gold may on the move higher this year, but investors keep pulling money out of gold ETFs, with $562M of outflows YTD (through June 27), according to Bloomberg, including $1.34B exiting in Q2. "Many have failed to notice the fact that gold has shown a strong performance this year, and it seems that the 2013 slump is still fresh in people’s minds," says Pension Partners' Michael Gayed.
Yesterday, however, the amount of gold in ETFs increased by 229K ounces, mostly due to GLD inflows. It's the biggest one-day increase since May and largely offset all of June's outflows.
The outflows in 2014 don't compare to the stampede in 2013, says UBS, and it suggests the bulk of the selling is now in the rearview mirror.
Gold today is ahead 0.5% to $1,328 per ounce - a three-month high.
China's national chief auditor has discovered $15.2B worth of loans connected to falsified gold transactions. The loans date back to 2012, and were borrowed from numerous banks.
Chinese traders and investors are known to borrow against commodities such as gold, copper and soybeans, and most of it is valid trading. However, the Chinese audit office has found many gold processing firms that borrowed based on fake transactions in the gold market.
Further investigation may result in new restrictions on commodity financing.
A nice-sized rally has turned into a melt-up for the precious metals and the companies that pull them out of the ground. Gold is up 3.9% to $1,319, its highest level in two months, and silver is ahead 5.7% to $20.90. GLD +3.6%, SLV +5.4%
The gold miners (GDX +4.7%), and the silver miners (SIL +6.1%).
A dovish interpretation of the FOMC news from yesterday makes for a nice excuse, as does the President's move to send 300 military advisers to Iraq to try and head off an all-out civil war there.
Now up about $30 per ounce since the FOMC announcement, updated Fed economic projections, and Yellen press conference yesterday, gold is just cents away from $1,300.
Peter Boockvar notes the Fed may be ignoring recent warming inflation data (when pressed on the fast numbers, Yellen called them "noisy"), but gold may not be. In any case - with just 3 FOMC meetings to go until QE is over and rate hike discussions start in earnest - markets will have to keep a close watch on inflation figures in addition to labor market indicators.