Presentation on theme: "The Gold Crash /Market Update – May 2013 Daryl Montgomery May 16, 2013 Copyright 2013, All Rights Reserved The contents of this presentation are not intended."— Presentation transcript:
The Gold Crash /Market Update – May 2013 Daryl Montgomery May 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: 1 st 4 months of 2013 vs 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 15 th. 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 2 nd half of April. Gold inventory in COMEX warehouse drops 30% in 2 nd 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 tonnes of gold in 2/3 weeks following April 15 th. - 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 13 th 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 futures market and predicts it will fall to $1390 by end of year. Someone sells 400 tonnes of gold in London on April 15 th (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).