video-april-24-2013-archives-daily-show

 

Gold will be trading in a range as we wash out more and more of the jitters, with investors and traders assuring themselves that we are not in a new bear market but in the midst of a correction. One might even call it an adjustment.

 

Keep a close eye on Goldman Sachs, which has turned around its position and is now long in gold. Their positions are big enough to move markets and they may move suddenly.

 

Behind the rise in gold prices, which is spread across the physical, spot and futures markets, is the fundamental fact that with the price having gone lower for months, people are being persuaded back to buying gold as a commodity. It makes no difference if they are buying for weddings in India, for home stashes in China or gold coins for speculation in the United States, Great Britain and other western countries. Sovereign funds have also been quietly buying physical gold.

 

Some are speculating that many investors are in a short squeeze situations and have to buy back long to hedge against the shorts. Evidence is hard to come by, but it doesn't sound completely unreasonable. 

 

Another factor to watch is the bond market. Bond yields have been getting squeezed for some time although there was a respite when the equities markets were soaring and gold tumbling. The baseline advice falling yields give us is that it means that QE will not be stopping soon. Very good for gold.

 

The markets, going the conventional wisdom, have been hostile toward monetary easing, predicting crazy inflation rates. The starting gun for the great inflation rate was premature. Many conservative thinkers bought into the classical model and were unceremoniously dumped from their positions. 

 

De-flation is still a bigger  worry for the developed world. At some point, as we are fond of saying, inflation will come back, if not roaring, howling in the night.