Thursday, August 4, 2011
After rising some $50/ounce in about a week, gold is slightly down so far today.
As Tyler Durden explains, margin calls are forcing the start of a gold liquidation:
As expected, the massive global rout is shifting to the best performing asset: gold, which courtesy of pervasive repo desk margin calls (which are merely trying to preserve capital for their TBTF holding companies) is seeing liquidations to satisfy collateral margin requirements.Reuters confirms:
Gold recoiled from a record high in heavy volume Thursday, as mounting recession fears fed a global stock market maelstrom that forced investors to liquidate bullion profits to cover losses elsewhere.But this may be only a short-term correction.
As MarketWatch notes, gold futures are soaring:
Gold futures tacked on as much as $18 an ounce Thursday as concerns about the U.S. economy and Europe’s sovereign debt crisis and Japan’s intervention in the currency market to stem the rise in the yen sent investors into their defensive shells — and to gold as a safe haven.
“Gold is still proving its character as a store of value in the current market environment, marked by equity markets tumbling sharply, in part, and continued high risk aversion,” analysts at Commerzbank [Germany's second-largest bank] said in a note to clients Thursday. “And the yellow precious metal evidently still has strong support.”
“Central bank currency intervention or money printing and competitive currency devaluations have resumed with gusto, which is of course bullish for precious metals as they cannot be devalued or debased,” analysts at GoldCore wrote in a report Thursday.
The Swiss central bank on Wednesday surprisingly lowered the key interest rate and announced a massive expansion of liquidity on the domestic money market, analysts at Commerzbank said. “These steps by the two central banks are aimed at halting the appreciation of their currencies and not burdening their domestic economies even more.”
“Up to now, both the Swiss franc and the Japanese yen have been regarded as ‘safe havens’,” they said. “If they lose this status, only gold would remain and the interest in gold should increase further.”
Note: I am not an investment adviser and this should not be considered investment advice. Personally, I am long gold.