Tag Archives: GLD

Business, Finance, Occupation & Industry

Gold: The End of an Era

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By Alex Dumortier, CFA, The Motley Fool

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Stocks in Japan and Hong Kong suffered sharp losses today, and major European markets are also in the red. U.S. stocks look to be following their lead this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average down 0.8% and 0.64%, respectively, at 10:05 a.m. EDT.

Gold is losing its luster
On the back of a challenging week during which it lost $60 per ounce, gold is reeling on Monday, down more 5%, having dipped below $1,400 intraday for the first time since March 2011. Gold is a highly volatile asset, and recent downward momentum could be nothing more than a spate of volatility in a long-term secular uptrend. Still, I think Societe Generale‘s research note of April 2, titled “The End of a Gold Era,” looks increasingly prescient. The report included an end-of-year price target of $1,375, and that figure is now in sight. Ten days later, Goldman Sachs piled on with a year-end forecast of $1,450.

Bear in mind that the yellow metal was trading just below $1,600 at the publication of both reports. As the following chart for the SPDR Gold Shares ETF shows, gold has dramatically underperformed stocks so far this year:

GLD data by YCharts.

One of the reasons the metal is so volatile is that, relative to traditional asset markets (stocks and bonds), the gold market is a minnow, particularly when one considers the size of the “free float” — the amount that is actually available for trading. This quality amplified bull-market moves when sentiment was on its side; if a bear market is underway, it will do the same on the downside. And there’s plenty of potential downside left: Gold would need to decline by nearly half to achieve its inflation-adjusted average price since the price of gold floated in Aug. 1971.

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The article Gold: The End of an Era originally appeared on Fool.com.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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From: http://www.dailyfinance.com/2013/04/15/gold-the-end-of-an-era/

Business, Finance, Occupation & Industry

The World's Top Bank Tells Investors to Shun Gold

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By Doug Ehrman, The Motley Fool

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For the second time this year, Goldman Sachs slashed its forecasts for gold prices for both 2013 and 2014, adding to the pressure on gold prices lately. So far, 2013 has seen the Dow Jones Industrial Average up nearly 11%, the S&P 500 up nearly 9%, and gold prices down more than 5%. Even with the global and U.S. economies continuing to show signs of weakness, gold prices have moved very little since late 2011. Given the negative view that Goldman is taking of gold, the bank now suggests shorting the commodity. While I don’t see things for gold as being quite that weak, significantly reducing your exposure to gold seems prudent.

Gold Price in U.S. Dollars data by YCharts.

Goldman’s case against gold
In the current round of price reductions, Goldman lowered its average price per ounce outlook for 2013 from $1,610 to $1,545. The investment bank now sees the price contracting to $1,350 in 2014, which is a significant reduction from the $1,490 price target it once held. For the rest of the year, Goldman sees plenty of negative pressure: “While there are risks for modest near-term upside to gold prices should U.S. growth continue to slow down, we see risks to current prices as increasingly skewed to the downside as we move through 2013. In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast.”

One of the potential catalysts for the above-mentioned increased decline is an accelerating deterioration in investor confidence. A great number of gold investors piled into the commodity on a speculative basis to not miss the expected move. As prices continue to stagnate and fall, investor capital is likely to look for greener pastures more and more quickly. As speculative positions are unwound and more stop-losses at triggered, the move lower could be sharp.

Spikes lower are actually a hallmark of commodities. Prices usually trend gradually higher, or even sideways, but when moves lower happen, they tend to be violent and expensive. This is one of the reasons so much risk is often associated with commodities trades — the move lower can occur before you have a chance to get out. Owning shares of ETFs such as the SPDR Gold Trust can mitigate some of this risk, but large speculative positions in GLD may have contributed to gold’s run, making the relative protection of the ETF somewhat diminished.

Is there safety in miners?
For an extended period, gold miners such as Barrick Gold have underperformed the pure commodity play. Over the past year, Barrick is down more than 40%, while GLD is down about 7%. Over the long term, you would expect this relationship to normalize, meaning miners should outperform at some point. When this happens, however, there’s no guarantee that either investment will be headed higher — the miners

From: http://www.dailyfinance.com/2013/04/14/the-worlds-top-bank-tells-investors-to-shun-gold/

Business, Finance, Occupation & Industry

The Gold Plunge Continues. Today, $1,500. Next Stop, $1,400?

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By Doug Ehrman, The Motley Fool

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After a multiyear run that has made countless investors significant returns, gold has fallen out of favor with investors both large and small. Recently, Goldman Sachs recommended shorting gold stating that it could drop even faster than they expect if certain conditions line up against the yellow metal. While the global economy remains on questionable ground, even these negatives seem to be insufficient to drive gold prices higher.

You must now begin to wonder not what the next positive catalyst will be, but if gold falls below $1,500, which looks probable, a dip below $1,400 is likely to follow.

Technically speaking
While Fools don’t follow technical analysis, neither do we ignore clear and convincing evidence that can have a real impact on our investments. The commodity has solid support around $1,500, but not much below that for quite a while. Commodities are notorious for following technical patterns because so many traders look at these factors. This is not reason alone to short gold, but it’s definitely worth noting.

Gold Price in US Dollars data by YCharts.

Goldman’s view
A significant basis for Goldman’s negative view on gold is the muted reaction the commodity has had to global macroeconomic events: “With our economists expecting few ramifications from Cyprus and that the recent U.S. slowdown will not derail the faster recovery they forecast in 2H13, we believe a sharp rebound in gold prices is unlikely,” Goldman said. While I think this outlook view oversimplifies the forces acting on gold, it’s not without merit. While the events in Cyprus represent evidence of economic uncertainty — which is typically bullish for gold — it also led to a strong U.S. dollar, which is bearish. It should not be surprising that these forces cancelled each other out initially, but the lingering weakness in gold is not promising.

Continuing weakness
Perhaps one of the most troubling realities for gold is that inflation continues to remain in check despite the Federal Reserve‘s slavish devotion to quantitative easing. Many large and small investors piled into gold, specifically into ETFs such as the SPDR Gold Trust . As these investors see their positions dwindling and stops are hit, this may accelerate selling and drive gold even lower. That’s one of the catalysts Goldman points to as a potential driver of gold prices below its target of $1,450. If money flows from GLD become increasingly negative, that has the potential to put significant downward pressure on gold.

The verdict
When gold prices remain stagnant, even in the face of global weakness, it’s time for concern. Gold has enjoyed a solid run, but the current slump seems likely to continue. In addition, where miners such as Goldcorp have underperformed the commodity for an extended period, earlier in the week that trend seemed to be reversing. Structural changes of this nature should be seen as an additional warning sign and a cause to stay on the sidelines. If

From: http://www.dailyfinance.com/2013/04/13/the-gold-plunge-continues-today-1500-next-stop/

Business, Finance, Occupation & Industry

China's Mixed Message for Gold

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By Doug Ehrman, The Motley Fool

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China‘s Purchasing Managers Index rose last month, with a March reading of 55.6 relative to the February reading of 54.5; remember, a reading above 50 indicates expansion and is usually deemed positive for the economy. The rise was led by a 4.5 point increase in the construction sub-index to achieve a March level of 62.5. While the increase is a positive indicator for the Chinese economy, the level rising less than expected mirrored both U.S. and eurozone reports.

While the expansion indicates a move toward increasing stability for the Chinese economy, and thus the global economy – a bearish factor for gold – the fact that the reading came in below expectations provides some support for the commodity. Perhaps tipping the scale is the fact that weaker than expected growth in China is bullish for the U.S. dollar. On a short-term basis, positives for the dollar tend to have an immediately negative impact on gold. Gold, as represented by the SPDR Gold Trust , suffered its worst loss in several weeks during Tuesday’s session.

Mixed signals
With industrial production numbers coming in weaker than expected across the globe, you might think that this sign of weakness for the global economy would be seen as positive for precious metals. The market has interpreted softening PMI numbers, however, as a sign that industrial demand for the metal may contract. This element of demand has played a critical role in supporting precious metals prices over the past several weeks.

Behind the expansion in the Chinese construction numbers is the $150 billion in approved infrastructure projects that the government is using to combat slowing growth. While still booming by most Western standards, China‘s GDP growth fell to 7.8% for 2012 – this represents its lowest level in 13 years. Again, while slowing global GDP growth is typically listed as a bullish sign for precious metals, the bearish factors are winning the day of late.

Chinese weakness and muted inflation concerns have been positive for the dollar and negative for gold. In a recent research note, Michael Haigh and Patrick Legland of Societe Generale noted: “inflation has so far stayed low (U.S. inflation has been trending lower since late 2011) and now we are beginning to see: 1) the economic conditions that would justify an end to the Fed’s QE; 2) fiscal stabilization that has passed its inflection point; and 3) a US dollar that has begun trending higher.” The pair shares one of the most bearish views of gold on the street.

Looking ahead
Where the GLD has been weak, gold miners like Goldcorp and Barrick Gold have been even weaker. Year to date, the ETF is down roughly 6.5% and both miners have fallen double digits. Goldcorp, which recently announced the closing of a $1.5 billion note offering to help fund its ballooning operating costs, will release first-quarter earnings on May 2. Barrick, recently announced negative operating results for the entirety of 2012, again on rising …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Silver Is a Better Stock Rally Bet Than Gold

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By Douglas Ehrman, The Motley Fool

GLD Chart

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With all three major stock indexes flirting with new all-time highs, investors seem to be joining the rally with abandon. Despite the very real issues of sequestration, continued easy money policy from the Federal Reserve, and a weak employment picture, there are some positives that suggest the stock market‘s rally may have legs. Still, prudent investors look at the whole picture and use caution in their approach to trading, meaning that an allocation to precious metals is wise. While both gold, as represented by the SPDR Gold Trust , and silver, as represented by the iShares Silver Trust , have been on a multiyear rally, the industrial applications of silver make it a better play at current levels.

GLD data by YCharts.

The stock market’s historic run
Over the past few weeks, the Dow Jones Industrial Average has hit a series of new historic highs, and the S&P 500 is zeroing in on its own all-time high. Highs like this tend to entice investors into stocks as fears of missing the rally intensify. This type of rotation is often a strong contrarian indicator, but the news isn’t all bad. As things stand, the S&P’s current P/E ratio is more than 5% below the index’s historical average of 14.8, based on data going back to 1968 from Thomas Reuters. In addition, with U.S. Treasuries yielding less than 2%, the average dividend yield for companies in the index was 2.19% as of last quarter; even with the run-up, stocks are offering more yield than government securities are.

In terms of the overall economy, U.S. manufacturing was unexpectedly strong in February as retail sales figures had a good showing. Factory output, which had fallen 0.3% in January, doubled expectations by increasing 0.8%. Last week’s job’s report also showed a marked improvement in the employment situation, but with the economy adding 236,000 jobs, the figure was still below the sustained 250,000 that economists believe are necessary for a recovery.

Potential pitfalls
While these figures make the stock market look appealing, it’s important to put them into the proper context. Bickering in Washington continues to intensify as the effects of sequestration are beginning to be felt. Some of the sillier debates have focused on the cancellation of White House tours and President Obama‘s golf outings, while 700,000 jobs remain in harm’s way.

White House Press Secretary Jay Carney accurately described the cuts:

It’s an unfortunate result of the arbitrary, across-the-board nature of the sequester cuts. That was the — I use this term facetiously — the genius in the design of the sequester: It was written in a way to make it terrible. That was the purpose. Republicans and Democrats alike wrote it that way so that it would be so onerous that it would compel Congress to take alternative action to reduce our deficit in a more responsible way.

Of course, the compromise has yet to occur, and this is putting the economy in …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Commodity Alchemy: Turning Gold into Lead

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By 24/7 Wall St.

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When the commodity traders at Goldman Sachs Group Inc. (NYSE: GS) say that commodities may be oversold right now they exclude gold from the rest of the asset class. In the near term, the Goldman analysts think that commodities will rise 2% to 6% although the firm remains neutral on commodities’ 12-month outlook, expecting a return of 3%.

We’ve already gone over some of the issues with investing in gold, either in mining companies like Barrick Gold Corp. (NYSE: ABX) and Kinross Gold Corp. (NYSE: KGC) or in ETFs like the SPDR Gold Trust (NYSEMKT: GLD). Goldman thinks that petroleum and copper are the short-term winners. Petroleum due to the lack of spare capacity and increased demand from emerging markets, and copper because the pull back in pricing last year was driven by concerns about China that no longer apply.

To which we say, “Maybe.” Petroleum, at least in the form of crude oil, costs more on the spot market now than it does on the futures market. That backwardation could be a buying opportunity if the global economy is in fact accelerating and will continue to do so in the second half of this year. The suggestion is that a “buy and hold” strategy will pay off because crude oil supplies will come under pressure.

That’s what happened (to some extent) in 2008 when crude went to $147 a barrel. How well do the conditions from 2008 fit the conditions of the crude market in 2013? Perhaps not all that well.

As for copper, the Chinese government has recently said it will soak up some of the liquidity in the country’s banks in an effort to keep inflation under control. New rules related to real estate and housing could cool some of the exuberance in the construction sector in China, too. On one hand, we could be in for a repeat of 2008 when commodity prices went on an upward tear. On the other hand, commodity producers will continue to overproduce, keeping prices low.

Where does this leave the big banks like Goldman, J.P. Morgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS), all of which reported double-digit declines in their commodities business last year? Lower market volatility plus restrictions imposed on trading by the Dodd-Frank Act have hit the banks’ trading operations hard. The banks could try to divest their commodity arms or spin them off into separate companies, but none has said much at all about its plans.

And that lead into gold bit? Last year Glencore International plc and Trafigura, two of the world’s largest commodities trading houses, kept large supplies of lead in storage and off the market in an effort to raise the price, which had fallen to a 52-week low of around $0.72 a pound. Today lead sells for about $1.00 a pound. Gold is up about 3% in the same period.

Filed under: 24/7 Wall St. Wire, China, Commodities & Metals Tagged: ABX, GLD, GS, JPM, KGC, MS<p style="clear: both;padding: …read more
Source: FULL ARTICLE at DailyFinance

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Gold ETFs Dumping the Yellow Metal

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By 24/7 Wall St.

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Last year marked the twelfth consecutive year for rising gold prices. But that could be the end of the yellow metals string. Since the beginning of the year, gold ETFs have sold 140 metric tons of gold, and the month of February saw the highest outflow of gold on record according to a report in the Financial Times.

We have already noted some of the issues investors need to keep in mind about gold this year, and the dumping of physical gold by ETFs like the SPDR Gold Shares (NYSEMKT: GLD) and the ETFS Physical Swiss Gold Shares (NYSEMKT: SGOL) appears to indicate that investors are more willing now to bet on a recovering global economy. The need for a safe-haven seems to have taken a backseat to a new appetite for risk.

The impact goes even deeper though. If gold prices continue to decline, demand for gold will fall and the prices that gold miners are able to get for their production will fall, putting even more pressure on the tenuous profits now available to gold miners. The gold miner ETFs, Market Vectors Gold Miners ETF (NYSEMKT: GDX) and Market Vectors Junior Gold Miners ETF (NYSEMKT: GDXJ) are both down around 20% since the beginning of the year, although neither had a particularly buoyant 2012 either.

The bad news even spreads to silver, where the Global X Silver Miners ETF (NYSEMKT: SIL) is down the same 20% since the first of the year and the iShares Silver Trust (NYSEMKT: SLV) has lost 10% since a mid-January peak.

The gold sell-off could just be temporary, and a shock to the global economy could bring investors back. Lord knows there are plenty of things that can still go wrong with the slow economic recovery.

Filed under: 24/7 Wall St. Wire, Commodities & Metals, ETF Tagged: GDX, GDXJ, GLD, SGOL, SIL, SLV

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

GLD Makes Bullish Cross Above Critical Moving Average

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By ETFChannel.comIn trading on Wednesday, shares of the SPDR Gold Shares ETF (AMEX: GLD) crossed above their 200 day moving average of $161.24, changing hands as high as $161.49 per share. SPDR Gold Shares shares are currently trading up about 0.3% on the day. The chart below shows the one year performance of GLD shares, versus its 200 day moving average:
Source: Forbes Markets