this post refers to Eugene’s chart posted at the top of this thread
Let’s take some time understanding this chart
The blue line shows the amount of gold held in the GLD ETF – I believe the left axis is showing tons
Eugene is pointing to the action in 08 and 09 as a change in trends
No argument about that – clearly something changed – the price of gold went down while the tonnage of gold held by GLD went up
Eugene’s interpretation of this change is that smart money sold physical gold while dumb money bought paper gold in GLD
I won’t argue that point – it is one possible interpretation of the data
I will point out however that, as always, there is more than one factor acting on any given market at any given time
These factors express themselves in the price action of the market being analyzed
We can talk, argue, bloviate, etc about one interpretation vs another all day long – the data that Piggs are so insistent upon shows up in price
Notice in the chart that Eugene provided how gold’s price behaves when it pushes up through a round number ($400, $500, etc)
It doesn’t just punch through the number and move on to the next target – it has to beat on the number a few times before punching through decisively
So Eugene’s chart shows us the same action at $1000 – price has touched the number and pulled back
If we look closely we see that gold has had several rises of $250 – from $450 to $700 – from $650 to $900 – form a base and then rise, form a base and then rise …
Current base is $900 – tell me that the next target for gold, based on this chart, ISN’T $1150/oz!
Back to GLD holdings
So they started to increase in Feb 2008
Hadn’t the equity markets started to tank around October of 2007?
Let’s see, DOW 14,100 in Oct 2007 – DOW 11,600 in Feb 2008 – a decline of 2500 points or 18%
Do you think a few stock investors might have been scared out of stocks and into the perceived safety of GLD? Unwilling to pull their money out of 401Ks and retirement plans to buy physical gold, they were constrained to buying paper gold ala GLD?
