09-26-2011, 12:38 AM
|
|
|
Confirmed User
Join Date: Oct 2001
Posts: 1,901
|
As the weekend ends so far the commentators seem near unanimous - not a bubble pop, but profit taking to cover losses.
With the added point that the oddity of ETFs makes metals more vulnerable and prone to bobbles.
http://online.wsj.com/article/SB1000...=ITP_pageone_0
This WSJ piece is jammed with editorial crap but near the bottom says...
Quote:
Some hedge funds were selling to raise cash to meet margin calls from lenders. Other investors were using proceeds of silver and gold sales to replenish other parts of their portfolios, which had fallen in value in recent sessions, said George Gero, precious metals strategist at RBC Global Futures.
In addition, it appeared that European banks were selling gold, possibly in order to raise cash and shore up their balance sheets, Mr. Gero said. This selling was then magnified by so-called momentum traders whose strategy is to piggyback on moves up or down in price.
Silver faces the added woe of being widely used in industry, and therefore vulnerable to fears that weak economies will consume less. Moreover, the Shanghai Gold Exchange said Friday that it will expand the upper and lower trading limits for its silver contract.
Exchange-traded funds that invest in, and track, the metals also have helped investors move quickly in and out of gold and silver.
|
A Gold Rush Wanes as Hedge Funds Sell
Quote:
For the better part of the last two years, some of the world?s biggest hedge funds have been piling into gold, betting the precious metal would provide an effective hedge against inflation or be a safer place to park cash as equity markets around the world stumbled.
But to the surprise of many investors, when equity markets across the globe tumbled once again on Thursday, gold moved sharply lower as well.
Gold futures for September delivery fell $66.30, or 3.7 percent, to $1,739.20 an ounce in New York. It was quite a turnabout for the metal, which has been soaring in recent months amid the turbulent stock markets.
Hedge funds, which have been ratcheting down their positions in gold futures since early August, were quickly named as the culprits in the latest sell-off.
Some traders said that hedge funds were beginning to unwind, or close out, what has been a very popular and profitable trade for the last 18 months as they bet the dollar would fall and that gold would rise. In the last month alone, the euro has fallen nearly 4 percent against the dollar amid worries about the European debt crisis.
The sell-off in gold was part of a broader move in the markets that had investors shifting away from perceived riskier assets, like commodities, and into the dollar in reaction to the Federal Reserve?s announcement on Wednesday of its new stimulus program.
In addition, the Fed said that there were ?significant downside risks? to the United States economy, which sent several commodities, including crude oil and copper, tumbling on Thursday on fears of a global slowdown in demand.
Other market participants said hedge funds were selling their positions in gold to raise cash to meet increased capital demands for their borrowings from Wall Street banks as the assets they have put up as collateral, like other commodities or stocks, have declined sharply in value.
|
|
|
|