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Mid-Day Gold & Silver Market Report – 9/23/2011

Hedge Funds Are Driving Down Gold PricesHedge funds are selling gold and this is the number one reason why gold prices are down. The big question: “Are they selling because they are no longer bullish on gold or are they selling because they need to raise cash quickly and gold is a highly liquid asset?” Hedge funds not only need to raise cash to cover margin calls, in turbulent times like these, redemption requests increase and this too takes cash. Michael Gayed, Chief Investment Strategist for Pension Partners comments, “The tendency for individual hedge funds or anybody is to sell winners before they sell losers. What’s been one of the few winners this year? It’s been gold.” Not all funds are selling and there are still some strategists who predict gold to reach $2,300. After all, even with the pullback, gold is up over 20% for the year.

Art Cashin, Director of Floor Operations at UBS Financial Services, says there might be a Thursday –Monday scenario in play, that could cause a massive rally in the markets next week. Mr. Cashin explains that we might be about to experience this historical trading pattern. The Thursday-Monday pattern begins with a steep decline on Thursday with very high volume. Friday’s markets turn choppy (high volatility) and then weekend news sets the market up for a massive sell-off (capitulation) on Monday. The sell-off usually ends by Monday, but can extend into Tuesday. Shortly thereafter, capitulation is followed by a massive rally.

The ratio of gold price and platinum price is the largest it has been in almost two decades. “The ratio is indicating that markets are still concerned about a global recession,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. Platinum prices are highly correlated to its industrial uses, so as manufacturing forecasts decline, so does the price of platinum.

At 11:47 am (CT) the APMEX precious metals spot prices were:

  • Gold - $1,660.10 – Down $81.60.
  • Silver - $32.14 – Down $4.46.
  • Platinum - $1,623.00 – Down $90.60.
  • Palladium - $643.70 – Down $21.40.

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Disclaimer:
APMEX’s ‘Market Reports’ provide our readers with a review of spot price activity and some of the factors that may be affecting the market for precious metals, three times during the trading day. While the information is obtained from sources we believe to be reliable, we do not guarantee its accuracy or its completeness and we encourage you to conduct your own investigation prior to making any decision based on the information. The "News and Commentaries" are not intended as a comprehensive discussion and there may be other factors that may be affecting the financial marketplace. These "News and Commentaries" are provided for informational purposes only and do not constitute a recommendation by APMEX to hold, to purchase or to sell any precious metal product. All orders, all purchases and all sales, if any, are subject to the terms of the User Agreement and other applicable policies.

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