Gold sell off continues – off $52 or 3.5% for the week

(USAGOLD – 11/8/2019) – Gold’s sell-off gained momentum during the European trading session shedding another $16 before finding tentative support below the $1460 mark.  It is now trading at $1460 – down $8.50 on the day. Silver’s downside was even more pronounced – tumbling another 26¢ to $16.86. Indications of progress on US-China talks triggered the drop initially but once the metals broke through support levels, technical selling added to the downside. As of this morning’s pricing, gold is down $52 or 3.5% on the week.  Silver is down $1.28 or 6.6%.

Technical analyst Clif Droke thinks current gold market weakness at its core is the result of decreased demand in China and India – the two mainstays in the physical market. He believes though that the effects of the sell-off might be limited. “[D]emand for the yellow metal as a safety hedge against geopolitical certainty was, and still is to some extent, a major driver for gold this year,” he says in a Seeking Alpha editorial,. . . “[W]hile investors and institutions may be inclined to liquidate some of their safe-haven holdings of the yellow metal in the wake of the latest progress to ending U.S.-China trade dispute, there are still enough geopolitical worries to warrant them maintaining some gold exposure in their portfolios as a hedge against future volatility.”

Recent reports of Swiss refinery exports shifting to London from Asian destinations support Droke’s observations. Those bullion exports are ending up in ETF stockpiles held by global investors – mostly among institutions and funds hedging economic uncertainty.

Closing note: We should keep in mind, too, that the status of trade talks has been a swinging pendulum. Today’s positive scenario could quickly switch to negative tomorrow. Late yesterday afternoon Reuters reported ‘fierce opposition’ at the White House to a rollback in tariffs.

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990

Chart of the Day

HowMuch graphic of gold reserves by country in map formImage courtesy of HowMuch.net (Click to enlarge)

Chart note:  “In 2010,” says HowMuch, “the world’s central banks stopped selling gold and started accumulating it. As gold provides a hedge against economic uncertainty and currency manipulation, the action of these central banks gives us insight as to which countries are most capable of handling an economic storm. . .A common theme in economics is ‘those who own the gold make the rules.’ Recent statistics suggest a large disparity between the top gold holders in the world and those governments holding less of the yellow metal.”

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