Jim Rickards: Why Is Gold Tanking?

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Here’s the likely reason why gold is falling right now when it should be rising…


by Jim Rickards via Daily Reckoning

The coronavirus continues to take its toll on the stock market.

If you were expecting a major recovery today after yesterday’s bloodbath, you were very disappointed.

Stocks opened higher this morning but soon fell back into red territory again, where they stayed throughout the day.

The Dow ended up losing another 879 points today after yesterday’s 1,031-point hammering.

The S&P and Nasdaq were also big losers today, down 98 and 256 points respectively.

For investors accustomed to “buying the dip,” this is quite a change. As noted macroeconomic analyst Mohamed El-Erian said earlier today:

I understand the inclination to buy on the dip. I understand that the path of least resistance in this market is to bounce up… but I stress, this is different.

Meanwhile, the all-important 10-year Treasury yield fell to a record low this morning as investors continue to pour into safe-haven assets.

The 10-year yield dropped to 1.32%, falling beneath its previous record low of 1.325%, which it set in July 2016 following Brexit.

That means the bond market is projecting a poor outlook for the global economy. And over the long haul, the bond market has an excellent track record of being right.

Gold was down big today, losing $45.20. But that’s not because of gold itself. It’s all about the falling stock market.

When you think about it, it doesn’t make sense.

After all, if investors are fleeing for safety, which we’re seeing in the Treasury market, why wouldn’t they be buying up gold as well?

Gold was up close to $30 yesterday, before the price began dropping late in the day.

Here’s the likely reason why gold is falling right now when it should be rising…

With the stock market plummeting, hedge funds and other institutional investors have had to suddenly raise cash to meet margin calls on their positions in the equity markets. And they had to get the cash from somewhere.

Gold is a very liquid asset that can quickly be traded for cash.

They can either sell the actual gold bullion they own or they can unload their positions in gold ETFs (like GLD).

So my estimate is that they dumped their gold positions to raise the money. And that’s been driving the listed gold price lower.

It has nothing to do with gold’s fundamentals, which are actually very strong. Demand is increasing, central banks are hoarding record amounts of gold and new supplies are dwindling.

That’s a recipe for skyrocketing prices, and the bull market in gold is still very much intact.

The latest selling is just a quirk of the market, in which institutions have to raise cash in order to cover their positions when the market’s dropping.

Again, it has really nothing to do with gold itself. This is just a temporary blip.

If you haven’t bought gold yet, this is an ideal opportunity to scoop up gold at a bargain-basement price. Or, if you already own gold, to stock up on more.

For gold at least, it’s an ideal opportunity to “buy the dip.”

Gold is going much, much higher.

I’m not sure how many more opportunities like this we’re going to see. I urge you to take advantage of it while you can.

信報財經新聞

有機構投資者據報減持黃金，套現以應付股市急挫帶來的孖展壓力，導致紐約期金周五價格跌近5%，錄得7年來最大單日跌幅。

紐約4月期金收市跌75.8美元或4.6%，每盎斯報1566.70美元，單日跌幅是2013年6月以來最大；本周累計跌5%，是2016年11月以來最大單周跌幅；2月跌幅是1.3%。

5月期銀收市跌1.278美元或7.2%，每盎斯報16.457美元，是2013年4月19日以來最大單日跌幅；本周累計挫11.6%，2月跌幅為9%。

GoldMining執行副總裁Jeff Wright表示，據交易商獲悉，不少大型基金拋售黃金，以應付股市急挫帶來的孖展壓力。他認為，金市基調仍然良好，下周有望反彈，重返1600至1650美元區間。不過，如果基金套現壓力不減，金價可能下試1550美元。

Kitco.com高級分析員Jim Wyckoff認為，金價大跌反映市場對股市急瀉的憂慮，升溫至極為嚴重的水平。

JonesTrading首席市場策略師Michael O’Rourke擔心，股市與金價同步大跌，是通縮來臨的徵兆。