The Shine Is Coming Off Of Gold
$GLD, $SLV, $PPLT
Assets in the world’s biggest Gold-backed exchange-traded product fell to the lowest since the start of the financial crisis as equities rallied and investors prepared for the onset of higher US interest rates, hurting demand.
Holdings in the SPDR Gold Trust (NYSEArca:GLD) dropped 0.2% to 704.22 tonnes Wednesday, the lowest level since September 2008. That is the month that Lehman Brothers Holdings Inc. collapsed, causing panic across global markets. Since marking a high in December 2012, they have contracted 48%.
Gold prices have been trapped in a Bear market as the US economy’s recovery from the crisis sent equity markets surging and cut demand for safe-haven assets.
Purchases of American Eagle Gold coins from the US Mint had the weakest May in 8 years and Perth Mint’s sales were the lowest since Y 2012. World equities climbed in Y 2015 as US stocks reached a record and the main gauge in China more than 2X’d in 12 months.
After Lehman’s bankruptcy, the world’s central banks unleashed unprecedented monetary stimulus, sending Gold to a record in September 2011 on bets that inflation would accelerate. Instead, consumer costs stayed stable, and the precious metal fell in Ys 2013 and 2014. Prices are little changed this year on bets the Fed is getting closer to raising rates.
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Total holdings in Gold-backed ETPs dropped to 1,586.9 tons Wednesday, the lowest since Y 2009, according to the data. The cashe slumped 40% since reaching a record 2,632.5 tons in December 2012.
Higher interest rates lessen the appeal of Gold, since it does not pay interest like competing assets, such as new bonds. The outlook for increasing borrowing costs has also driven gains in the Buck, reducing demand for precious metals.
Holdings in exchange-traded products (NYSEArca:SLV) backed by Silver rose for a 7th day, the longest stretch since y 2013 as of Wednesday. The 86.7 ton inflow was the largest in almost 7 weeks.
Platinum (NYSEArca:PPLT) fell 0.6% to 1,108.60 oz, and Palladium declined 0.6% to 740.80 oz.
| HeffX-LTN Analysis for GLD: | Overall | Short | Intermediate | Long |
| Bearish (-0.32) | Bearish (-0.35) | Bearish (-0.44) | Neutral (-0.18) |
| HeffX-LTN Analysis for SLV: | Overall | Short | Intermediate | Long |
| Neutral (-0.18) | Neutral (-0.04) | Bearish (-0.25) | Neutral (-0.24) |
| HeffX-LTN Analysis for PPLT: | Overall | Short | Intermediate | Long |
| Bearish (-0.39) | Bearish (-0.28) | Very Bearish (-0.65) | Bearish (-0.25) |
Have a terrific weekend.
HeffX-LTN
Paul Ebeling
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