MAY 22, 2018
Volume often precedes movement in markets. Where you see large-scale inflows but little price action, it’s like a spring growing ever more coiled, as demand ramps for a limited pool of shares available in a given price range.
While the gold price has pulled back recently (a positive development for all long-term investors who wish to continually add to their position until gold’s reemergence as true money, as fiat currencies fail, as they always have and always will) as it has moved inversely to the USD’s short-term strength, investor interest is at a five-year high.
Parsing the crosscurrents of data that underlies price movements is a worthwhile endeavor. When you see fundamentals that are not reflected in pricing, you’re identifying market inefficiencies from which you can profit.
On the silver front, the gold/silver ratio remains elevated, checking in just below the key level of 80 (it’s at 79) which has historically always signaled a great time to add to silver holdings. And demand from both industry and for silver jewelry from the Chinese middle class could help spur price gains as well.
The SPDR Gold Shares ETF saw $396 million of inflows in the first quarter this year, boosting holdings to its highest level since 2013.
Bloomberg writes that top hedge-fund managers John Paulson and Ray Dalio have kept their faith in bullion after a strong first quarter. Paulson & Co. had 4.32 million shares in SPDR Gold as of March 31, and Bridgewater Associates also maintained its stake in the second largest bullion-backed ETF.
Credit Agricole strategists Valentin Marinov and Manuel Oliveri wrote in a note this week that the dollar’s recent rally has “pressured gold to levels where it is a worthwhile investment” with limited downside risk, reports Bloomberg.