Gold trending lower despite Greek crisis

In the Lead: “It’s Academic”

Platinum-group metals fell in sympathy with the yellow and the white metals, with platinum witnessing a $19 decline to the $1,751.00 mark and with palladium dropping $25 (2.59%) per ounce; the most in the entire complex. It was last quoted at $752.00 the ounce on the bid-side. Rhodium exhibited no change and was quoted at $1,850.00 per ounce. Market analysts still peg that unique noble metal to be under-priced in terms of being nowhere near “fair value” (unlike gold and silver at the present time).

In fact, the BofA Merrill Lynch Survey of more than 250 fund managers reveals that the institutional crowd has indeed reduced its exposure to commodities and has begun diverting funds towards cash and towards bonds. The same surveyed group opines that gold is currently more overvalued than at any time since the final month of 2009. Meanwhile, crude oil has given up a fair amount of its spring price froth and is struggling near the $95 level; a price that many believe is still too high given global conditions.

Thus, it came as not too much of a surprise that Fidelity International’s Multi-Manager Income Fund sold down its precious metals allocation “for fear commodity prices will suffer first as the global economy slows down.” On the other hand, the sell-down might perhaps partially also be attributed to the fact that the manager’s ETF holdings had experienced a 90% appreciation since the time they were first bought two years ago.

The theme of potentially cratering commodity values was echoed by Hackett Financial Advisors yesterday; the firm’s principal said he is expecting a “collective tumble” in the near future in that space. The metric that Shawn Hackett uses as an early indicator of a major top being put into place in the niche is the weakness in copper prices. The pattern was manifest back in 2008 and it turned out to precede a significant sell-off in commodities.

Reuters’ Metals Insider reports that “copper prices slid on Wednesday as the US dollar rose and fears of weak growth and demand prospects from the United States, the world's largest economy, hit investor sentiment.” The then surging dollar (signs of which have also begun to be seen of late) also posed difficulties for commodities at that time and it might do so once again, according to one senior market strategist at commodity broker Lind-Waldock.

And now, for something completely…the same. A view on gold from the world of academia. The decade-long bull market has yielded more research on the yellow metal than perhaps at any previous time in market history. More than 186 papers (most of them in-house productions) have been circulated on the subject, according to Associate Professor Brian Lucey of the School of Business Studies at Trinity College in Dublin, Ireland. Professor Lucey dissected the aforementioned body of work in a monograph titled “What do Academics Think They Know About Gold?” which the LBMA published recently.

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