The Reason Gold Has Been Declining Is Simply This…
Edited for posting by:munKNEE.com
There have been many motives offered for the recent and ongoing plunge in gold and silver prices since the start of October from sentiment to a supposed trade against the Euro, etc, etc. but the true reason is a lot more prosaic. It’s old fashioned liquidation. Let me explain. Words: 257
So says Paulo Santos (www.thinkfn.com) in edited excerpts from his post* on Seeking Alpha entitled A Very Simple Explanation For Gold’s Weakness.
This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) andmay have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Who is liquidating?
If I am correct, the market’s movement is simply explained by John Paulson’s funds being forced to sell due to redemptions. SPDR Gold Shares (GLD) was Paulson’s largest position by far at the end of September 2012, amounting to 30.6% of his holdings. The GLD ETF is obviously the most important gold ETF in the market, indeed, the single largest factor affecting the market, so heavy selling of this ETF can easily move the entire market.
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We also have public statements – for instance from Morgan Stanley and Citigroup – recommending that investors pull out money from Paulson’s funds, after horrible performances both in 2011 and 2012. If we know about these very public instances, we can be sure that there’s an entire iceberg below water, also redeeming its investments in Paulson’s funds.
Conclusion
This thesis cannot be much simpler. What got the whole giant ball of snow rolling down the hill was Paulson’s forced selling. Paulson was GLD’s largest holder, GLD was Paulson’s largest holding by far, and we have very public proof that Paulson is seeing heavy redemptions after horrid performance. Things can’t be much clearer….
*http://seekingalpha.com/article/1076631-a-very-simple-explanation-for-gold-s-weakness
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2012-12-21 20:02:27
Source: http://www.munknee.com/2012/12/the-reason-gold-has-been-declining-is-simply-this/
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