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
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Major Indices:
Dow Industrials 10-Years Monthly
10,40,65-Month Moving Averages; RSI, DMI, MACD
S&P 500 10-Years Monthly
10,40,65-Month Moving Averages; RSI, DMI, MACD
Nasdaq 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
10, 40, 65-Week Moving Averages, RSI, DMI, MACD
GOLD ETF: GLD One-Year Daily
50, 200, 325-Week Moving Averages, RSI, DMI, MACD
GOLD ETF: GLD One-Year Daily
50, 200, 325-Week Moving Averages with Volume
Silver ETF: SLV 10-Years Monthly
10, 40, 65-Week Moving Averages, RSI, DMI, MACD
Silver ETF SLV 10-Years Weekly
10, 40, 65-Week Moving Averages, RSI, DMI, MACD
Silver ETF: SLV One-Year Daily
50, 200, 325-Week Moving Averages, RSI, DMI, MACD
Silver ETF: SLV One-Year Daily
50, 200, 325-Day Moving Averages, with Volume
Mining ETF GDX 5-Years Weekly
10, 40, 65-Week Moving Averages and RSI, DMI, MACD
Mining ETF GDX One-Year Daily
50, 200, 325-Day Moving Averages and RSI, DMI, MACD
Mining ETF GDXJ 5-Years Weekly
10, 40, 65-Week Moving Averages and RSI, DMI, MACD
Mining ETF GDXJ One-Year Daily
50, 200, 325-Day Moving Averages and RSI, DMI, MACD
Copper ETF JJC 10-Years Weekly
10, 40, 65-Week Moving Averages, RSI, DMI, MACD
WTI Crude Oil 9-Years Monthly
Bonds and Currencies
30-Year Treasury Yield 10-Years Weekly
10, 40, 65-Week Moving Averages, RSI, DMI, MACD
10-Year Treasury Yield 10-Year Weekly
10, 40, 65-Week Moving Averages, RSI, DMI, MACD
U.S. $ DXY 10-Years Weekly
10, 40, 65-Week Moving Averages and RSI, DMI, MACD
Euro FXE 10-Year Weekly
10, 40, 65-Week Moving Averages and RSI, DMI, MACD
Swiss Franc FXF 10-Year Weekly
10, 40, 65-Week Moving Averages and RSI, DMI, MACD