Gold Demolished, Lowest Since the Lehman Collapse

Gold collapses as 13,000 contracts are unloaded in thin trade.

Bullion.Directory precious metals analysis 4 November, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics

This week’s gold analysis, along with Terry Kinder’s technicals, indicated gold was on weak ground. As it just so happens, over 13,000 gold futures contracts were unloaded at 12:30 AM EST, causing gold prices to collapse and the US dollar to surge.

The iShares Gold Trust (GLD) reached levels not seen since the Lehman Brothers collapse in 2008.

For the fifth night in a row, gold futures experienced pressure at 12:30 AM EST, right around the time Japanese traders break for lunch. This morning, over 13,000 contracts were sold worth over $1.5 billion.  Silver got clobbered, as well, falling through $15.50 per toz. The GLD has hit levels unseen since the Lehman collapse in 2008, as gold prices seem to complete a 180.

Holding in the world’s largest gold-backed ETP fell to 738.8 metric tons. The short-term, yes short-term, exit from quantitative easing has supported the dollar. This could be the first back-to-back annual drop since 1998. Assets slipped 7.4 percent this year.

According to Adam Klopfenstein, senior market strategist at Archer Financial, said “not many people see the need for a safe haven.” Analysts look towards the recovery’s job gains in mere number amounts.

However, the internals show a fragile, elderly job force.

Almost six million jobs were gained in the 55 and older demo, while over two million were lost in the key demo of 25 to 54 years of age. Quantitative easing has also been rendered useless with consumer spending and demand going nowhere.

Unfortunately, not many saw the need during 2007. Gold and silver had collapsed into 2008 as the dollar gained ground. Then all it took was the very bankruptcy of Lehman to send precious metals to new highs. It is likely too early to call any bottoms given the extreme sentiment.

Gold and sliver took a huge dump in 2008, even as the world witnessed the unraveling of the largest investment and insurance firms. It is likely prices will search out these levels before continuing higher.

As pundits talk about the glorious economy, lets look at the mid-term elections in the US. The GOP gained control of the Senate, as Americans grow tired of the current economic policies that left them nowhere.7 of 10 voters were unhappy with where the economy sits, while 65 percent disapprove of where the country is heading, according to exit polls.

Several trillion in stimulus programs, and six years later, the US still maintains a paltry 2.2 percent growth since the recession “ended”.

So, precious metals are likely to head lower, while those with the ability to hedge should. However, the collapse of the gold paper market is not a reason why to not hold precious metals.

Even as prices sink into a bottomless pit, the US Mint reported over 67,000 ounces of gold sold in October, a 21 percent increase over the previous month. Sound investors are adding along the way.

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