kingworldnews.com / by Eric King / May 18, 2012
With continued uncertainty in markets around the world, today Ben Davies, CEO of Hinde Capital wrote the following piece exclusively for King World News. Davies believes the gold and silver liquidation is over: “I humbly believe the seller is done. For one week there has been several but mainly one entity selling Comex gold futures, as well as some physical to liquidate on the open and closes. This suggest to us it was a CTA commodity type fund. They use volume areas of the day to transact.”
“The sell-off in gold is reminiscent of the 2008 deleveraging process but it is more similar in dynamics to 2012 when a notable fund manager had to sell his gold/ ETF holdings. There were buyers of course, seller and buyer volumes must match. But the need to sell overwhelmed the need to buy.
When you have redemptions time is against you to liquidate, so it becomes a case of sell at any price as time becomes finite. Gold buyers picked up some bargains then and they will now.
Before FOMC minutes two nights ago the seller was back at the close. And then the FOMC minutes changed the dynamic of market with the mention by some members that QE would be back if they saw renewed economic weakness. This is the association for us all of why the market stopped going down but in truth the seller was done.
Like the December experience, once the seller is done, the market will snap back. We run intraday correlations just to observe if markets are starting to fibrillate against each other. We could see that risk assets were diverging and SPX was no longer moving with a 1.0 correlation with gold and silver. We took this as a positive sign that the precious metals were decoupling from risk assets.
The seller was being soaked up by multiple buyers. But all week we saw no significant Asian buying until two nights ago when the market went straight up yesterday on the open of the Asian morning.
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