Thursday, April 19, 2012

Has Gold Had It?

With the Federal Reserve signaling that QE3 is off the table, many traders are now betting that the barbarous relic is about to take a prolonged vacation.

Without a dividend or an interest yield in a world desperate for cash flow, the yellow metal suddenly doesn’t have so much to offer. Take away the fear of inflation that our deflationary reality assures, and gold is suddenly left wanting, along with all other hard assets. Uncle Buck becomes the big man on campus.

For the first time in many years, gold is ranking high on the list of preferred hedge fund shorts. The US Treasury’s sale of America Eagle one-ounce gold coins is down 70% from last year and is now plumbing a four-year low. Open interest in the gold futures market has hit a two and a half year low, indicating that capital is fleeing the market. This is usually what happens before prices die. Read More