Predictably, after the gold price has been pushed down in the paper market by the western Central Banks – primarily the Federal Reserve – negative propaganda to outright fake news proliferates.
The latest smear-job comes from London-based Capital Economics by way of Kitco.com. Some “analyst” – Simona Gambarini – with the job title, “commodity economist,” reports that “gold’s luck has run out” with the 25 basis point nudge in rates by the Fed. She further explains that her predicted two more rate hikes will cause even more money to leave the gold market.
Hmmm…if Ms. Gambarini were a true economist, she would have conducted enough thorough research of interest rates to know that every cycle in which the Fed raises the Funds rate is accompanied by a rise in the price of gold. This is because the market perceives the Fed to be “behind the curve” on rising inflation, something to which several Fed heads have alluded. In fact, the latest Fed rate hike, on balance, has lowered longer term interest rates, as I detailed here: Has The Fed Really Raised Rates?
Furthermore, to which “gold market” is Ms. Gambarini referring? There’s the fractional paper gold markets of NYC and London and the physical importation and bullion trading markets in the eastern hemisphere. While she does indeed acknowledge the upswing in gold demand coming from India and China, she downplays its significance. Currently India and China are importing more physical gold than at the same time last year. Several other smaller markets have been actively importing significantly more gold now than at the same time last year (Turkey, for example).
Finally, Ms. Gambarini – unbelievably – states that “she sees less safe-haven demand supporting the market as geopolitical concerns have started to disappear.” I don’t even know how to respond to that idiotic assertion considering that Russian and U.S. military jets are antagonistically engaged in the sky over the Middle East as I write this. Either Ms. Gambarini is tragically incompetent at her chose profession or she is purposely propagating fake news.
If Ms. Gambarini was smart enough to do thorough research on the topic or was interested in reporting the truth, she explain that, at least 80% of the time, the gold price rises during Asian trading hours and falls during NYC/London hours, like today:
The mining stocks have been strong relative to the price of gold this week. My bet is that this reflects the likelihood that the latest price-takedown of gold in the paper market has run its course. The dramatic drop in Comex paper gold open interest, as well as a drop in the net short position of the Comex bullion banks and a drop in the net long position of the hedge funds (per the COT report), reinforces the signal transmitted by the mining stock this week.
Any flinch from the Fed in its alleged desire to tighten its monetary policy, or if a “spark” hits the growing geopolitical powder-keg in the Middle East, and gold will quickly shoot over $1300 on its way to much higher levels.