The Gold Crash /Market Update – May 2013

Daryl MontgomeryMay 16, 2013

Copyright 2013, All Rights Reserved

The contents of this presentation are not intended as a recommendation to buy or sell any security.

Gold Demand Up to April Crash

• Gold demand already strong before April drop:- Chinese gold imports hit record in March (50% of global demand comes from Chindia).- Canadian Mint: 1st 4 months of 2013 vs. 2012 - Gold demand: +123% (18.3 tonnes) - Silver demand + 88%

• Gold drops 13% on April 12/15 to 1350 range.

• Physical demand for gold explodes after April 15th.

• Press reports “gold price dropping because of lack of demand”. Oh really?

Gold Demand After April Drop

• Premiums on physical metal in US expand noticeably (sign of a shortage).

• U.S. Mint runs out of gold American Eagles.

• Purchases from Perth Mint double in 2nd half of April.

• Gold inventory in COMEX warehouse drops 30% in 2nd half of April (and continues to drop). Gold moving to Asia.

JP Morgan Gold Inventory at COMEX

Inventory started dropping when gold fell below $1750.

Total COMEX Gold Inventory

Gold Demand Post April 15 – Asians Gone Wild

• Chinese consumers buy 300 - 600 tonnes of gold in 2/3 weeks following April 15th. - Long lines and some gold shops sell out. - Caravans to Hong Kong to buy gold.

• Indian demand brisk (Hindu gold buying festival Akshaya Thrithiya May 13th this year).

• Indian gold/silver imports in April 2013 up 138% to $7.5 billion (India imposes gold restrictions).

• Dubai gold imports up 10 times. US ships $1 billion in gold to South Africa.

Chinese Shopping for Gold

Chinese Gold Production/Demand

Indians Shopping for Gold

What Caused the Gold Crash?

• Prior to crash, Wall Street sold well over $1 billion in structured gold-linked notes (bond + derivative) which provided higher yield that bonds.

• If gold fell below a certain level, usually $1530, this would cause major losses and cause heavy selling.

• As gold trades just above $1530, Goldman Sachs tells its clients to short it in the future’s market and predicts it will fall to $1390 by end of year.

• “Someone” sells 400 tonnes of gold in London on April 15th (only a handful of possibilities).

What Caused the Gold Crash?

• Gold falls below $1530 and all the way to $1335.

• Almost 100% chance that 400 tonne sale is a short (no one has that much gold), so it will have to be bought back.

• In late April/early May, 300 tonnes of gold exits GLD and IAU.

• U.S. needs to return gold to Germany and has promised 300 tonnes by 2020 (request came after Fed refused to submit to an audit).

What Will Happen

• Gold/silver are trading just above their lows giving you a chance to accumulate.

• High-priced gold production is at $1300.

• Big trading houses keep predicting that gold will fall to $1200 or $1000 (this helps them).

• If this happened, all physical gold supply globally would disappear because of huge demand.

• Gold (and silver) will eventually experience a massive short squeeze.

• Before that, anything and everything could happen, including big temporary drops.

Background Material for Charts

• Moving Averages – 50-day, 200-day, 325-day or 10-week, 40-week, 65 week

• RSI – relative strength index, 80-overbought, 20 oversold, 50 divides bearish and bullish

• MACD – moving average convergence divergence, zero divide bullish bearish, peak and bottom numbers variable

• DMI – Directional Movement Index, +DI (blue), -DI (red) and trend line (black).

Market Analysis

@nyinvesting

Major Indices:

Dow Industrials 10-Years Monthly

10,40,65-Month Moving Averages; RSI, DMI, MACD

S&P 500 10-Years Monthly

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Russell 2000 10-Years Monthly

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Japan Nikkei 10-Years Weekly

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Russia RTS 10-Years Weekly

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Metals and Oil

Gold ETF: GLD 10-Years Monthly

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GOLD ETF: GLD 10-Years Weekly

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GOLD ETF: GLD One-Year Daily

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GOLD ETF: GLD One-Year Daily

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Silver ETF: SLV 10-Years Monthly

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Silver ETF SLV 10-Years Weekly

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Silver ETF: SLV One-Year Daily

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Silver ETF: SLV One-Year Daily

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Mining ETF GDX 5-Years Weekly

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Mining ETF GDX One-Year Daily

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Mining ETF GDXJ 5-Years Weekly

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Mining ETF GDXJ One-Year Daily

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Copper ETF JJC 10-Years Weekly

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WTI Crude Oil 9-Years Monthly

Bonds and Currencies

30-Year Treasury Yield 10-Years Weekly

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10-Year Treasury Yield 10-Year Weekly

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U.S. $ DXY 10-Years Weekly

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Euro FXE 10-Year Weekly

10, 40, 65-Week Moving Averages and RSI, DMI, MACD

Swiss Franc FXF 10-Year Weekly

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