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Good News: Investors Cut Gold Holdings to Six-Year Low; Good Timin'

Investors in general do not give a rat's ass about gold.

Here's proof: Gold Out of Favor as Investors Cut Holdings to Six-Year Low.

Investors cut holdings in bullion-backed exchange-traded products to the lowest since 2009 as surging stock markets from the U.S. to China hurt demand and prospects for rising U.S. interest rates boosted the dollar.

The assets contracted 5.45 metric tons, or 0.3 percent, to 1,594.08 tons as of Tuesday, according to data compiled by Bloomberg. The holdings slumped 39 percent since reaching a record 2,632.52 tons in December 2012, shrinking by 33 percent in 2013 and a further 9.3 percent last year.

World equities surged in 2015 as U.S. stocks reached a record and the main stock gauge in China more than doubled in 12 months. The Federal Reserve has signaled it expects U.S. growth to pick up after a contraction in the first quarter and, while unlikely to raise interest rates this month, it's left the door open to tightening later this year. Higher rates curb gold's allure because it usually gives returns only by price gains

"You're seeing some significant, excess returns from U.S. stock markets and China's stock market as well," Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. in Singapore, said before the data was released. "That's not positive for gold demand."


Gold Weekly Chart

Weekly Gold Chart


Good Timin'

As I have commented before, sentiment is not a timing indicator. Bad sentiment can always get worse.

The good news is gold has been holding a steady bottom for nearly two years as investors dump it chasing insanely priced equities and junk bonds.

The precious metals slump will reverse. I just cannot say when.

What you do not want to see is bullish sentiment in the face of declining prices, something I eventually expect to see with equities and junk bonds. We were there in 2000, 2007, and it's going to happen again.


Investment Philosophy

Buy assets when no one loves, sell then when everyone loves them.

Buy gold and silver now, and sit on it. Both are very much out of favor.

 

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