USAGOLD closing comment
24-Apr (USAGOLD) — You’ll have to search long and hard to find a positive word about gold in the financial press today. So, if you’re looking for a more gold-friendly view of current events, you’ve come to the right place.
First of all, a daily drop of just over 1% is hardly something to get distraught over. Gold remains well contained within the broader range, albeit in the lower quintile. Where some may feel disheartened, many see opportunity, as evidenced by the strong call volume we experienced today.
Secondly, there are still plenty of reasons to justify gold purchases. Perhaps most compelling has to do with the ongoing movement of physical metal from West to East. Swiss export data announced earlier in the week was quite revealing in that regard. See yesterday’s DMR for details.
Bloomberg Intelligence suspects China may have in fact tripled their gold reserves since they were last reported in 2009. That is potentially huge! See my DMR from Tuesday for the details.
We also saw evidence this week of aggressive Russian and Indian buying over the last couple months. I suspect the Chinese et al will find these prices very appealing come Monday.
We’ve seen this time and time again in recent years: Paper sellers in the West drive the price down, buyers in the East take advantage of the lower prices to accumulate real metal, thereby driving the price right back up.
Monday’s options expiration may have also played a role in today’s price drop. The banks and brokerage houses love to drive as many options out of the money as possible going into expiration. This is another trading pattern we see with great regularity. Once the options have expired, the underlying market snaps right back to the previous level. In that context, today’s efforts weren’t terribly successful.
Before the end of next week, Greece is obliged to provide a list of reforms it is prepared to make in order to secure the next tranche of bailout funds. After today’s meeting in Latvia, Greece and its creditors are no closer to a deal.
This is perhaps the biggest potential black-swan within the short-term time horizon. A default seems extremely likely, which could throw the whole European banking system into turmoil. Whether or not this results in Greece getting ejected from — or opting to leave — the eurozone remains to be seen. As next week progresses, gold could rebound considerably on safe-haven buying.
Our prudent, wealth preservation minded client continue to accumulate gold in times of relative calm (and certainly during price drops) to ensure a protected and properly diversified portfolio. One just never knows when that next crisis will come sweeping in unannounced.
So there ya go, a little ray of golden sunshine to end your week. Be sure to check out the weekly top gold stories that will be posted shortly for yet another dose of positivity!
