Gold on Sunday night 11 March 2012

BullionVault's market report from Friday is the only outline I've read of what went on at the end of last week.

Source physical gold ETF SGLD vs PHAU - cheaper, growing fast

Today I tried a bit of research on the size of gold ETFs traded on the London Stock Exchange and on the spreads investors are likely to see (with a helping hand from Index Universe).

The process reveald a few more physical gold ETFs than I expected but most of them were pretty small compared to PHAU, GBS and Source (SGLD), although I couldn't always find their assets under management.

Gold breaks $1,700, no CDS showdown?

Sitting here in my Hackney flat relying on free news, Google Finance and free gold spot price charts from the likes of BullionVault I'm wondering why gold is moving up before the Greek deal.

Greece and gold on Thursday 8 March

National, regional and global events are difficult to understand in their own right let alone slot into a gold price forecast.

This BBC explanation of the Greek debt crisis says the crucial deal needed with private bond holders is due this (March 8) evening. If less than 90% of bond holders agree to it then we should expect further delays and extra drama as Greece contemplates enacting a compulsory version of the deal - which could trigger default insurance policies (credit default swaps). But something has to happen soon as a big payment is due on March 20.

This morning (1am) gold was around $1,684 per ounce and £1,071 in sterling. This slight gain over Tuesday's and Wednesday's lows was down to positive feelings about the Greek deal. Reuters reported Bill O'Neill, partner at commodities investment firm LOGIC Advisors, saying: "Gold is up because there is growing evidence that there will not be a hard default in Greece."

Will that sentiment hold through tomorrow?

In the same Reuters piece Suki Cooper at Barclays  Capital said: "Although the macro environment is still very gold-supportive, in the nearer term it's going to be the physical market and whether that enables prices to consolidate enough so that investment demand can retake the reins."

Most analysts quoted in this BullionVault piece also say gold is still more likely to fall further.

It quotes UBS analyst Edel Tully saying physical buyers needed "in size... otherwise further downside seems inevitable". Axel Rudolph at Commerzbank saying "further weakness to be seen in the coming months, taking gold towards the $1,600/$1,500 region."

Today total buys for PHAU on the London Stock Exchange were around £8.3 million and sales were £13.3 million compared to yesterday's £13.6 million-worth of buys and £23.1 million of sales.

Before the outcome of the private bond deal investors will have the MPC rate setting and the ECB rate and press conference. And on Friday there  are the US non farm payrolls.

Brad Zigler on increasing correlation between stocks and gold.

Net £16m of physical gold ETFs sold on LSE on Tuesday March 6 2012

Total sales - I think - of physical gold ETFs on the London Stock Exchange today were worth £40.6 million while total purchases came to £24.6 million = net sales of £16 million.

(Correction) £8 million PHAU gold ETF sale at 9.44 am

It may not compare to the 31 tonnes of gold futures sold on 29 February after Ben Bernanke's speech -  but this morning someone sold an £8m lump of PHAU shares on the London Stock Exchange.

I bought gold before it dropped below $1,690

On Monday morning I bought 10 gold shares -  the ETF Securities Physical Gold exchange traded fund shares with the London Stock Exchange symbol of PHAU. (LSE shows there were two £8m PHAU sales today at around 9.44am)

Gold: tell me why I don't like manic mondays

As gold  markets open for Monday I'm about to go to bed...

Rebound... sort of

This morning Reuters said: "Asia's physical gold market witnessed a buying frenzy as jewellers, traders and investors rushed to take advantage of the nearly $100 drop in prices overnight, helping to boost prices."

Will gold stay in the $1,700 no man's land?

What Ben Bernanke (didn't) say today - did it change the landscape for gold significantly? Or was the exit - triggering the biggest one-day fall in three years - just a short term technical blip (the link quotes Jon Nadler from Kitco who said the fall was spurred by an early 1 million ounce sell order - no doubt that will fuel conspiracy talk). Reuters had the same quoting Jeffrey Sherman, commodities portfolio manager of DoubleLine Capital, a Los Angeles-based investment manager with $28 billion in assets: "It's just a pullback, it doesn't feel like it would be the start of a bear market".

I still believe gold is still worth owning - although I don't actually own any! Should I wait to see if it will fall further before buying again?

Some chartists have pointed out that the gold price doesn't tend to hang around $1,700 for long - if it's there it's usually moving up or down at speed.

Tonight it was hovering in that former no man's land.

In sterling that's around £1,066 per ounce which is what I'd be paying as a UK gold ETF investor.

I don't know exactly how much that would be translated into a gold ETF.

When the London Stock Exchange closed at 4.30pm the sterling denominated PHGP physical gold ETF was selling for £105.99 (This ETF is a good indicator for PHAU which is dollar denominated although it is bought and sold in sterling, however it tends to have wider spreads than PHAU and I don't know what the spot price of gold was at that time. 

If I had bought at close today, how would it have compared to past buying and selling?

My boldest and most recent move was selling all of my 28 physical gold ETF shares on 16 December 2011. Back then I got £100.77 per share before fees (fees were £11.95).  If I had bought 10 shares as markets closed today I would have paid £105.90,  more than 5% above what I sold at.

At the time, according to BullionVault's spot chart, the price of gold in sterling was around £1,079 per ounce.

The gold price has fallen a bit further since then but it is now rising again. The question is where it will be when markets open tomorrow morning - and whether I will buy?

Buying at £106 may be a 5% loss compared to the price at which I sold but it is better than my first two purchases at £111 per share on 22 September 2011 and £108 per share on 4 November 2011.

I'm not sure if that is a useful way to judge this - it sounds like an attempt to justify what I do now by comparing it to earlier mistakes. The question is whether I still believe gold is a good longterm investment, whether the US economy is really improving, whether the value of currencies have really been undermined by QE.

Gold drops $10 in 10 minutes

I'm in the process of rethinking my gold investment ideas. Just noticed that the gold price dropped $10 dollars and still wondering why.

I need to take a proper look at whether to get back in or if I have to wait for another significant drop in prices - which may not happen for a while.

Gold on 13 feb 2012

I started this at 11.45am with no particular aim. One thing I'd like to know is whether the gold price will fall a long way if something goes wrong in the eurozone - although that's what everyone is probably wondering.

This morning the price of gold was $1,729 (£1,094) after falling to $1,721  (£1,091) per ounce in early trading (which I saw late last night before I went to bed just as the price starting rising as news of the Greek parliament passing its austerity measures came through - at least that's what I think was going on.)

If I had wanted to buy this morning I would have got 10 PHAU shares for £1,084.85 after fees *(£1,072.9 before fees)

In comparison, on 29 January 2012 10 PHAU shares for $1,086.79 after adding £11.95 trading costs

On 12 December 2011 I bought 10 shares for £104.58 each - £1,057.74 in total (after fees).

On 4 November 2012 I bought 10 shares for £108.01 each - £1,092.10 in total (after fees).


On September 22 I bought 8 sharesfor £111.98 each - £907.78 in total (after fees).


On 13 January I was thinking about buying10 gold shares for £1,062.52 in total (after fees) which wouldn't have been much worse than my best buy rate on 12 December:

This morning my account at Hargreaves  Lansdown shows just  BlackRock Gold and General because that's all I have at the moment and its down a little.

The dollar index against GLD from this Bloomberg chart: http://www.bloomberg.com/quote/DXY:IND/chart

 And here's PHGP (sterling physical gold ETF) vs PHAU (dollar version)

Some of the stories I should look at today: BullionVault covers Peter Grandich - who is Peter Grandich? 

I scanned this from Wall Street Window which said trading margins in gold had been lowered last week which made it cheaper to speculate on futures markets. 

The piece quotes Bart Melek, head of commodity strategy at TD Securities, who said, "In a situation where the financial system may be at risk, people may need a lot of cash to buffer themselves against a potential shock such as a Greek default. They may swap out gold along with other assets for cash.” This is the thing that I am hoping will provide me with another good buying moment. But I am aware that this depends on how bad things get.

Jim Rogers says that gold will not go above $2,000 this year - but that's all he's said - no elaboration apparently.

Michael Hewson of CMC Markets gives his view on Greek deal today and the ongoing risks to its success. 

Do you have to be a terrorist to understand gold?

Britain's "best selling financial magazine" MoneyWeek has a piece on the back page called "The Magic of Gold" (10 February issue but I've only just noticed it was available online sooner) by Bill Bonner.

Bill writes for the Daily Reckoning. In a recent piece for the site he covered the gold standard and US politics.

Near the end of it he highlighted a Reuters story  about Sovereign Citizens and the Redemption movement and was unconvinced by FBI fears that there were some extreme criminal terrorist elements to this 'movement'.

Bonner said: "The FBI says these people are “extremists” who believe they have a right to protect themselves from what they see as an overbearing government. The G-men tell us that these extremists can turn violent “at the drop of a hat.”

"How long before they’re rounded up? And maybe they’ll round up “potential domestic terrorists” too, even those who have never committed any crime? And what about gold bugs? They may look harmless, but they give aid and comfort to dangerous elements, don’t they?"

Even so the FBI seem to take the problem pretty seriously: http://www.fbi.gov/stats-services/publications/law-enforcement-bulletin/september-2011/sovereign-citizens.

There is a habit of calling gold bugs terrorists like this spat between analysts at GFMS and GATA (the Gold Anti Trust Action Committee)

It is hard to tell how relevant this stuff is to the UK investor. There's not much evidence of it in the MoneyWeek piece. Instead we get an encouraging sales pitch for gold - which I should probably listen to (more below).

But the question for newbies to gold investing like me is whether there's really some kind of ideology driving the gold ownership of a lot of these gold commentators - not straight forward investment judgement.

There may not be anything wrong with that ideology but it could add a layer of complexity to the gold stories we are told - which is why it is interesting. Anyway, that sort of discussion is beyond me at the moment.

In MoneyWeek Bonner says: "We associate a rise in the price of gold with inflation. But gold is much more versatile than we think. It protects your wealth when paper money loses its value. It also protects our wealth when paper money gains in value. It protects you when you are right and when you are wrong."

When the value of money diminishes you get inflation. Bonner says that inflation will see the price of gold soar. He thinks Bernanke's aim at moderate inflation will help but suspects he'll overshoot.

The opposite scenario is deflation when money increases in value. Bonner points to the great depression when "the price of gold rose against dollars, even though the prices of food, clothes and other consumer items (as well as the prices of investment assets) were falling in dollar terms."

It sounds like a free lunch and I've always wanted one of those.

So, obviously I should be buying. Why not now? Gold is down a bit today and as the chart shows - and as chart-loving commentators have pointed out -  the price of gold tends to jolt from the $1,600s to the $1,700s - there's no smooth moves here. And its nearing that area now - around $1,715 - because of Greece and the euro... (Reuters)

So although the gold ETFs I do not own are down I'm still hanging on for worse.

Lunch of unnecessary pain

This is not a cash cow or a gold bull, it is a milk jug on the window sill next to where I ate toast and tomatos in a freezing kitchen in Hackney. As I ate the radio told me that the Bank of England had decided to inject another £50bn into the UK economy and that Greece had agreed to austerity measures. (Here's the FT on both: euro climbs on hopes of Athens deal).

I thought both of these would make buying gold an unlikely event today. I was imagining that the pound would have fallen in value as more QE would undermine the currency and I thought the gold price would rise - everything would rise - on good news about Greece.

It looks like I was wrong on both counts. The pound actually gained against the dollar and gold was looking cheaper for UK investors for a moment. Alice Ross in the FT said: "Analysts said that markets had already priced in a fresh £50bn of liquidity, with the rise in sterling suggesting fears that the BoE could have announced a higher level of £75bn had it not been for recent signs of improvement within the UK economy."

The chart shows ETF Securities' PHAU (US $ denominated physical gold ETF) vs PHGP (pound sterling denominated physical gold ETF).

Although since writing the above the price of gold may now be on its way up a bit ($1,740ish):

So it's back to waiting for the price of gold to fall. I think it will happen but I've generally been wrong in most of my thinking so far.

Gold - preparing for fresh buying opportunities?

I have not properly contemplated making any investment decisions since gold was a lot closer to $1,600. On Friday 13th of January 2012 I was waiting for further falls on Monday 16 January - hoping it would drop down to $1,605 or below.

It never happened. Gold may be down a bit over the last couple of days but it's still around $1,731.

Here's what's happened over the last week:

Meanwhile I still have about 75% of my portfolio in cash, the rest is in in Black Rock Gold and General fund. So despite the name of this blog I don't actually own any gold ETFs (PHAU) after selling them all in December.

Does this cash heavy situation mean I should fear something devaluing my pounds sterling before I get to buy any gold?

Greece could default with or without a bailout (Wall Street Journal: Greece could take the bailout money and run) and even if Greece goes smoothly attention will still turn to other eurozone problems.

 Generally, if something happens to the euro the pound gets hit too - at least it does in relation to the dollar. So while a falling euro would probably mean falling gold, it would also mean that the purchasing power of my pounds will be less, undermining the opportunity to buy US$ denominated gold. I need to work out if that's something I really need to worry about and if I can do anything about it.

(Although S&P is now threatening a further downgrade to the US as well - it also downgraded CME Group which runs commodities futures markets including gold but I've got no idea what the consequences of that might be).

Meanwhile some commentators say that stock markets have been over bought (Market watch: http://www.marketwatch.com/story/overbought-market-due-for-a-correction-2012-02-07?link=home_carousel). If something in europe or anywhere else upsets investors gold could go down too as it is still behaving like a risk asset.

For that reason I'm still not buying but I'm going to start watching a bit more closely now. Although judging by my past record that's good reason to expect gold prices to carry onwards and upwards!


Will Rhind, MD of ETF Securities in the US talks to Alix Steel on The Street. ETF Securities is still for sale but, like me, buyers may be waiting for a fall in the gold price before making an offer. Other commentators mentioned in her piece offered conflicting forecasts.

Bespoke said the U.S. dollar index was "in danger of breaking its six month uptrend" and a falling dollar could add support higher gold prices.

Meanwhile David Banister, chief investment strategist at TheMarketTrendForecast.com told The Street that gold is entering the last and final stage of its bull market. "I believe that it is a 13 year cycle and we are in the fifth and final wave pattern up," he says, which could last for 12-18 months."