Ay ay ay! Gold is approaching a death cross and all sorts of other commodities are looking nasty too.
Here’s a crazy situation to consider.
The gold lease rate (which can also be understood as gold Libor, the gold interest rate or the cost of shorting gold) is becoming increasingly negative at the short end. This is the natural consequence of Gofo rates rising ever more greatly beyond Libor costs at the front end. Since the gold lease is derived from the calculation of Libor minus Gofo, any instance where Gofo is greater than Libor leads to a negative gold lease rate. Read more
This was the gold price on Wednesday:
The FT reported last week that because investor inflows into gold exchange-traded funds have recently stagnated, many analysts have begun questioning if the decade-long rally for the gold market might be nearing exhaustion.
As the FT noted: Read more
Courtesy of some friendly city brokers, comes the following observation about spot gold price movements on Tuesdays:
We are increasingly interested by the move on Gold every Tuesday. I have grabbed the gold price chart from Bloomberg and the steps up in the price are noticeable. Almost without exception, the gold price has spiked $20ish every Tuesday for the past few weeks. Analysis shows an average move of 0.22% with a standard deviation of 0.49% on an average daily gold performance histogram. The Tuesday average is 0.75%. Read more
Hinde Capital, the London-based gold hedge fund — with an objective to outperform gold — have put out a note about what they feel are the CDO-esque qualities of the GLD gold exchange traded fund.
And yes, we realise they have a certain interest in criticising an alternative and rival gold vehicle — but it is worth looking at the points they raise, since they make a compelling case. Read more
Gold has been selling off in recent days, but to what degree could the moves be linked to a drop in the holdings of the GLD goldshares exchange traded fund? FT Alphaville notes there might be a perfectly reasonable explanation in the fact that rival iShares has dropped management fees on its equivallent gold fund product to woo over investors. Read more
We theorised on the possibility of some investors playing the contango trade in gold — perhaps from the moment they realised that financing costs would become low enough to make the trade profitable.
And while we stress this is just a theory – here are some interesting charts from Bloomberg showing a big contraction in the spread between the first month contracts and the second month contracts, as well as the second and the third from Lehman onwards — presumably as the arbitrage is eroded. Read more
According to the FT’s hedge fund correspondent, Sam Jones, the hugely successful Paulson & Co (he of subprime bet fame) currently denominates a third of its $33bn of assets under management in a share class bolstered by huge positions in the gold market.
In fact, the FT reports: Read more