JBGJ regards Indians buying less gold as cash crunch bites primarily as evidence that FOBs (Friends of Bloomberg) are not in gold. If India’s domestic gold market was as weak as presented there would be a significant discount to the world price… In reality the Government has struck a shattering blow at the trust Indians have in holding wealth in any form accessible to the Authorities. When things finally unglue, India’s propensity to hold gold will probably be found to have risen – John Brimelow’s Gold Jottings report – LINK.
Yesterday’s sell-off in gold occurred after the Comex floor had closed for the day. The period of time between when the Comex closes – 1:30 p.m. EST – and the CME’s Globex computer system trading closes for about an hour – 5 p.m. EST – is one of the least liquid trading periods of the 23 hour, 5-day trading week. It makes that period of time susceptible to manipulative price take-downs.
As it so happens, likely not coincidentally, Janet Yellen began speaking about monetary policy at 2 p.m. EST. She stated that the Fed expects a few interest rate hikes per year until 2019. Geez, that would take the Fed funds rate up to maybe 2%? Of course, helped along the by the bullion banks, the hedge fund trading algos grabbed the soundbytes spewing forth from Yellen and concomitantly sold paper gold and bought dollars. The dollar spiked up and gold was taken down to $1200. It traded below $1200 overnight on the ‘fumes’ of yesterday.
This post was published at Investment Research Dynamics on January 19, 2017.
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