"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, April 14, 2014

World Gold Council Report Pressuring Gold

The WGC just laid a heavy weight on the gold market this evening as their report detailing Chinese demand for the metal ( or more properly - its lack thereof ) is getting more circulation.

The reason? They expect demand from China to remain flat in 2014. That is a far cry from what has been the norm since 2002, from whence gold demand has increased every year since.

The report mentions what most of us who follow the gold market closely already knew - namely that Chinese gold demand in 2013 vaulted a remarkable 32%. Of course, that was the result of the very low price to which gold had fallen from its lofty perch up above $1900. China loves a bargain and gold was at bargain prices last year.

Dow Jones cites the managing director for the Far East at the World Gold Council as saying that they expect gold demand for 2014 to be 'on par with 2013'.

Gold began to drop sharply as the report circulated. My own thinking is that were it not for the current escalation in Ukraine tensions, it would have suffered much harder.

If WGC report is indeed accurate, and apparently many are thinking at this hour that it is, gold is going to face yet one more additional headwind. Remember, it has been this strong physical offtake from Asia, especially China, that has tended to bottom gold prices in the past especially in the face of reduced Western investment interest in the metal. If that Chinese buying fades, and if interest rates here in the US begin to perk up, gold could be in trouble.

It is too early to say yet, but bulls had better not blink or they are going to be playing defense. Funds, while still net longs in this market, are beginning to add to their short positions.