The spread between the Spot Price and the Physical Price is rising. The U.S. has suspended Gold and Silver Eagle sales. Eventually the manipulation by the bankers will fail, watch for the price of Gold and especially Silver to shoot up for the physical variety. Why do people still Trust Bankers? Take delivery of your assets.
Gold fell some 4% yesterday with forced selling being seen as hedge funds continue to deleverage and pension funds and other passive investors sell the various commodity indices. Also reports from Barclays that some European central banks had sold some 7.6 tons of gold during the week also acted to depress the market.
Central bank gold sales and leasing of gold have artificially suppressed the price of gold in recent years but with lease rates surging and central banks concerned about financial, economic and systemic contagion this source of supply is set to dwindle in the coming months. Indeed many South American, Middle Eastern, Asian and the Russian central bank have already stated their intentions to add to their gold reserves. The German Bundesbank has clearly stated how they view gold as a an essential monetary asset. "National gold reserves have a confidence and stability-building function for the single currency in a monetary union," the Bundesbank said.
However, rumours of central bank gold sales could continue to depress prices in the short term. After the sell off last Friday, UBS noted that “we have no explanation behind the sell-off in gold and silver seen late on Friday's trading although…Some more fundamentally based traders may have been concerned by the talk of central bank selling that we heard earlier in the day. One large central bank, not a signatory to the Central Bank Gold Agreement, was rumoured to have sold gold earlier in the day.
UBS said that the rumours were without substance and said that “certainly we saw no signs of this and the rumoured central bank is considered unable to sell gold - the story in itself may have been enough to trigger some profit taking.”
Demise of Hedge Funds and Falling Commodity Indices Creates Short Term Weakness in Gold
Many hedge fund managers are under severe pressure to liquidate positions as banks request more collateral to back funds' borrowing. Many hedge funds, including some of the largest, have gone to the wall in recent months and Credit Suisse estimates that 30% of roughly 8,000 hedge funds will close over the next few years.
Wealthy investors are turning their backs on high risk hedge funds as there is a reevaluation of the sensibility of massive leverage and banks are no longer willing to fund the hedge funds' speculations.
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Gold dips are merely buying opportunites. The long-term trend is up, up and away.
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