Pinnacle Activity Ticker
Gold Coin Purchases Down 50% From One Year Ago
Pinnacle Digest writes: In Clif Droke’s latest article he explains gold’s lackluster performance this summer and what could turn things around. Droke explains that, despite some commodities staging a rally of late (corn and oil in particular), gold hasn’t been able to garner any momentum.
Droke believes that last summer’s margin requirement increases by the CME triggered the ‘dead gold market’ and if you look back, it is precisely when interest in the metal began to fade (particularly in the US). Droke states that “The high frequency speculative crowd had its wings clipped last summer when CME Group initiated a series of margin requirement increases."
Droke goes on to explain that the retail investor hasn’t been buying gold as aggressively as recent years. In fact, gold purchases (such as gold coins) have fallen to levels not seen since early 2008. In addition, sales of American Eagle gold coins have fallen more than 50% from a year ago.
Droke believes gold coins are a fear gauge and given the strong market rally (in US markets) since October of last year, interest in precious metal investing has dissipated.
Despite gold being oversold, according to every technical gauge there is, Droke believes it will take a major economic or political market event to change gold’s course. This would include, of course, monetary stimulus and/or another crisis in Europe. While we agree with Droke that another round of monetary stimulus would be very bullish for gold, another crisis in Europe would not be. The US dollar has increased in value over the last 12 months by default. Thanks to the fiscal disasters in Europe over the past 12 months, the US dollar has seen an influx in demand, despite being the worst currency (fundamentally) in the world. And when the dollar rallies, gold suffers.
Click here to read Clif Droke’s entire article.