Another day another beating for gold. The yellow metal fell another 3.5% overnight bringing it to prices unseen for almost three years. The SPDR Gold Trust ETF (GLD)
is now down over 25% year-to-date as retail investors find themselves
on the wrong side of what is suddenly looking like one of the great
boom-bust cycles in precious metal history.
As for what's driving the plummet, MercBloc president Dan Dicker
says it's all about Main Street coming to the sudden realization that
there is no safety whatsoever in gold. "When the retail customer gets
frightened, they get frightened in a hurry and they get frightened for
big numbers," Dicker says in the attached clip.Retail investors are scared for good reasons. Gold is an investment that should have worked when the inflation which was supposed to run rampant due to currency devaluation kicked into high gear. As the inflation thesis gets debunked gold is getting mercilessly hammered. There just isn't a compelling fundamental reason to own gold and the chart is broken. The only thing left to do is hope and panic; usually in that order.
Dicker makes the point that the
GLD, as a massive ETF, is forced to buy and sell physical gold holdings
as the size of the fund fluctuates. When sellers start dumping the GLD
it forces banks to go into the market and sell physical gold
into a weak market. The result is what Dicker calls a "cyclical death
spiral" that makes calling a bottom an exercise in futility.
Those
looking to buy the dip in gold are fighting the trend, a tide of so
called "weak-hand" sellers and a broken fundamental investment thesis.
The market doesn't give out badges for bravery; hundreds of years of
gold trading history suggests there are better places to put your money
right now.
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