InvestMacro Forex News

By MoneyMorning.com.au

Shell shocked?

You’re not alone.

Gold has tanked by 13.4% in just two sessions.

The drop in gold yesterday alone was the biggest fall in more than three decades…

You expect some twists and turns in this game…but come on…what the hell?

The whole industry is reeling. From small investors to bigwig fund managers and everyone in between — the smashing you’re seeing in gold has everyone’s heads spinning.

This has the hallmarks of a full-blooded, class A, DEFCON 1, capitulation.

But far from being time to panic, this is time for cool heads to prevail. You may never see another opportunity again like it.

Let’s first back up, and put this move in context with a chart. This move even dwarves the shellacking we saw in September 2011.

Gold…Going Cheap — if You Can Get It

It’s a breath-taking chart.

But don’t expect it to stay here long.

You see, a gold price at $1350 is totally unsustainable.

The reason being that gold is now trading very close to the total cost of production for the world’s biggest producers.

This Gold Price Cannot Last

Once you factor in the corporate costs, sustaining capital, royalties, exploration costs and the rest of it, the real costs are often double what they advertise.

The result is that the all-in costs for gold production at the world’s majors — not just the C1 costs they’d like you to believe — are closer to $1250 / ounce.

And for many of the smaller producers, costs are now IN EXCESS of the current cost of gold. In other words, they’re losing money on the gold they sell now.

A year 10 economics student will tell you that this situation can’t last for long. Gold miners will have to slow production to reduce losses, and in some cases will have to shut up shop altogether. Supply will slow, causing the gold price to rise again. Gold is likely to bounce just on the expectation of this happening.

This is much like the situation we saw in iron ore last year, when iron ore crashed below the marginal cost of production briefly, before whip-sawing back up again.

This fall in gold has been even more extreme than even Goldman Sachs dared imagine. Last week they told clients to short gold, aiming for $1450 by year’s end.

It took a few days to happen…but then gold kept going.

Talk of Cyprus selling gold to pay for the bailout sent ripples out. However their 13 tonnes was immaterial to the market: China eats 13 tonnes for breakfast.

The concern was that maybe this would set a precedent for European nations facing similar situations. Investors are thinking: what if Italy had to sell their gold?

It seems unlikely given the tiny difference it would make to their debt levels. At current prices it wouldn’t even make a 5% dent in Italy’s balance sheet. The same goes for the rest of Europe.

Panic set in all the same, and soon you had technical selling as gold went through support level after support level.

Then matters got worse. Last night those helpful blokes at CME, who got their job on the basis that they didn’t have enough personality to get a job at a ratings agency, decided to hike margins on trading gold futures…

This put the squeeze on speculators, and caused another big fall in the price. There is a danger we see the same in China today. I’ll be watching.

But like I say, a gold price down here is totally unsustainable. Expect a bounce soon.

A very dirty game, to shake gold out of weak hands, is being played by some desperate players.

Savvy buyers are taking the opportunity to load up. And load up on physical gold – not the paper version. In the same vein, we have seen some mysterious moves of physical gold out of Comex in recent weeks from the big players. The big banks have been withdrawing their physical at the fastest rate in history.

You wonder what they know. Lifting our head out of the trenches briefly, we see that the US congressional deadline to raise the US debt level is on Thursday…

An Opportunity Amongst the Carnage

Existing gold investors are in pain right now, but this situation simply can’t last for long. Here’s a snippet of a note I sent Diggers and Drillers readers last night:

‘First The RSI is now down to levels last seen in 1999. When that happened, gold jumped 30% within a few months in the wake of the Washington Agreement.

‘Second, the current structure now has all the hallmarks of the 2008 structure: an exuberant rally followed by a drawn out 25%+ correction, concluding with a pull-back towards the 200 week moving average. After this happened in 2008, gold then commenced a three-year, 170% rally.

‘So is this latest move a precursor to something similar happening again?

‘First, we need to ask ourselves if the factors that drove gold up between 2008 and 2011 are still in place today.

‘Do we not still have continuing expansions in collective central bank balance sheets, with Japan just the latest entrant to the global money printing party?

‘And are the world’s major economies not still mired in low to negative real interest rates?

‘Also, is demand not still strong from key players like China, India, Central banks, and private investors?

‘In short — everything is still in place to support higher prices.

‘You may assume this painful price action would scare some off, but the reality is that it is a buying frenzy out there.

‘At shop level, retail investors are buying very rapidly. The guys at GoldStackers told me on the phone this morning they are insanely busy, and have only seen one seller in a week. I’ve heard many reports of the international mints seeing their busiest trade in years. And on the Shanghai exchange, phenomenal amounts are moving, with 120 tonnes settling already so far this month.

‘Here’s the thing — those that know the market are using this move to load up.

‘There are also increasing reports that despite this body blow to the gold price, supply is still tight. Certain products are getting harder to source. And after rising to 0.24% at the end of March, The GOFO (Gold forward offered rate), is trending back down again and is now at 0.17%. This is a good sign that the physical market is drying up again. 

‘So if the physical demand is so robust, and the market is getting tight, then what caused this move?

‘It’s hard to believe that a 24 hour, near 10% move in any commodity could ever be natural. Who ever really knows what goes on behind the scenes of this incredibly opaque market! But this move in gold has the fingerprints of the big banks all over it. It seems like dirty tactics from an anxious player.

‘We also had Goldman telling clients to short gold, with a $1450 target. Job done in record time! Now it’s time to cover your position and buy.

‘Goldman’s gold trade was yet another aspect of today’s gold market that reminds me of 2008. Back in 2008 they called for gold to pull back to $745. Gold actually went through that, in fact dipping briefly under $700. Once this was done, gold didn’t look back for the next three years, by which time it had increased by a cool $1200/ounce.

I’ve been following the gold story for months, and managed to get a meeting with Eric Sprott last month to run my ideas past him. We agreed that the opportunity was good when gold was at $1600.

And far from being time to cut and run, with gold crashing to the $1300’s the opportunity we saw last month just got much, much better.

Dr Alex Cowie
Editor, Diggers & Drillers
Join me on Google+

Ed Note from Kris Sayce: The gold price and gold stocks took a hammering yesterday. But does that mean it’s a good time to start buying? In today’s Money Morning Premium  , I reveal Doc Cowie’s secret gold stock buying formula that reveals whether you should buy or stay away…click here to upgrade now.   

From the Port Phillip Publishing Library

Special Report: TORRENT SIGNAL 3 

Daily Reckoning: Why China’s ‘Population Pagoda’ Could Mean Slower Growth for Australia

Money Morning: Beware the ‘Safety Bubble’, But Don’t Sell Dividend Stocks Yet

Pursuit of Happiness: Why the NBN is Dead Before it’s Begun

Diggers and Drillers:
Why You Should Invest in Junior Mining Stocks

By MoneyMorning.com.au

Do you remember the 1970’s?

Sure, it was the era of questionable sartorial choices. Men wore very unnatural colours, showing up on dance floors as they tried to boogie until they couldn’t boogie no more.

In an energy sense, though, it was also the time of the dreaded mile-long gas lines.

Oil was in short supply at gasoline stations. It was an era of conflict. The nations that produced much of what the US consumed were none too happy and cut the nation off from their petrol spigots.

In those days, oil was a weapon. It was being utilized by the Organization of Petroleum Exporting Countries (OPEC) to punish the US for its support of the State of Israel as it was under attack by both Egypt and Syria.

This ‘oil war’ spurred the US government into action. Rationing began, whereby certain markets had restrictions on gasoline sales to private and commercial vehicles.

In addition, Congress passed, and President Richard Nixon signed, The Emergency Petroleum Allocation Act of 1973.

The act set into motion price controls on crude oil produced in the US — with existing known fields and reserves becoming price restricted, while new production was allowed to trade at market rates.

One of the interesting developments by Hess and Occidental Petroleum was to use a newer technology of pumping CO-2 (Carbon Dioxide) into older oil fields that were no longer productive to release crude oil in rock formations.

This would not only be considered ‘new’ supplies of needed domestic oil — but those supplies would be able to trade at market rates. It was the semi-free market at work!

The projects were set aside by both companies due to challenges in the resulting crude oil. The trouble then was that the crude came up — but it was heavily mixed with water which made it prohibitive to use in what was then existing production and refining processes.

That Was Then — This is Now

Flash forward 40 years and crude oil production in the US is expanding. Over the last several years newer technologies have made it easier to release additional crude from oil fields — it’s the ‘shale boom’ you’ve read about.

Conventional crude, as opposed to shale, is typically produced by drilling wells, pumping oil to the surface and then sending it onward to storage and processing facilities. This ‘conventional’ process gets the easy oil but leaves a lot of crude still in the fields.

‘Fracking’ takes the additional step of using higher pressure water and chemicals to break up rock formations and forcing crude oil to the surface. The rock formations that they are breaking up are called the ‘source rock.’

Over millions of years conventional oil leaked upward from this source rock. That’s what created pools of oil that sit under Texas and California. But today oil producers are heading lower for the source rock — and that requires new technology like fracking, where the source rock is fractured to release oil.

And while fracking has become one of the more exciting parts of the market for new oil — both traditional drilling and fracking still leave as much as 75 percent of the oil still in the ground.

Today we’re skipping the frack wagon.

1970’s Tech, 2013 Profit…

Injecting CO-2 into oil fields is what is referred to as Enhanced Oil Recovery or EOR. The process doesn’t break up shale rock — but rather acts as a sort of lubricant for crude oil to slip up and out rock formations which allows it to be pumped to the surface.

This process is quickly being adapted in the Permian Basin fields in Texas and New Mexico — but should be expanding nationwide in the coming months and years.

EOR is going to be big. Right now — fracking is producing around three million barrels per day (Mbpd) in the US — while EOR is seen to be ready to produce four Mbpd and many more to come.

The difference from the failed attempts in the 1970’s and now is that oil companies have new and increasingly common technology known as de-watering to not only make water-logged oil workable — but also makes the water available for other uses.

This EOR revolution will be adding a substantial amount of overall proven crude oil reserves in the US, which currently stand at around 222 billion barrels. EOR could increase that number to 323 billion barrels, or more — giving the US the 5th largest crude reserves in the world.

Neil George
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

Australia: The Home of World Beating Dividend Stocks
12-04-2013 – Kris Sayce

Investors: Ignore Japan’s Yen Devaluation Game
11-04-2013 – Murray Dawes

What Japan’s Economic Disaster Means for Australia
10-04-2013 – Dr. Alex Cowie

Gold Bulls About to Win the War
9-04-2013 – Dr. Alex Cowie

A Better Inflation Bet Than Gold…Stock Market Investing
8-04-2013 – Kris Sayce

By MoneyMorning.com.au

The shift from computers to mobile devices and tablets is a work in progress. But it’s one that’s gone far already…from how you communicate with family and friends, to how you digest publicly traded content. Compared to decades ago, we really have it made.

Consider the following facts in the words of Peter Diamandis:

‘Right now, a Masai warrior on a mobile phone in the middle of Kenya has better mobile communications than the president did 25 years ago. If he’s on a smart phone using Google, he has access to more information than the U.S. president did just 15 years ago. If present growth rates continue, by the end of 2013, more than 70% of humanity will have access to instantaneous, low-cost communications and information.’

The next wave of innovation, however, is a new line of products that could succeed smart phone technology. In fact, it’s already shaping up to be the next battleground for the patent wars between the world’s big tech companies.

So What Comes After Cell Phones?

The answer is: Wearable technology.

Wearable technology aims to interweave personal computing and mobile capabilities into everyday life, in a way that is natural and intuitive.

We saw the first attempts in the 1980s, during the days of the calculator watch.

But Moore’s Law has allowed devices to get smaller and more powerful, giving designers more wiggle room to create more interactive products.

Recently, for example, Apple quietly issued a patent for what is speculated to be iWatch. And both Microsoft and Samsung are developing something similar.

Google is doubling down on its Google Glass, teaming up with venture capital companies to draw in professional designers in order to hack and churn out new iterations of it. Their goal is to turn smart glasses into the next major computing platform.

But in addition to watches and glasses, there’s also tech that’s embedded into clothing.

No…I’m not just talking about the electroluminescent shirts you may have seen at a Deadmau5 or Coldplay concert.

I’m talking about wearable technology with applications in real time monitoring feedback for athletes: Fitbit, Nike’s Fuelband, Garmin’s Forerunner, or UnderArmour’s Armour 39.

The best plays that are ‘patent war proof’ are investing in the chipmakers. Every computer, big or small, uses microchips.

Some Plays on This Idea

Qualcomm in recent years has had microchips incorporated into Apple, Samsung, Sony, and Google products like those smart phones and tablets you’ve seen hitting the shelves.

Competition with Broadcom recently caused the company to expand its portfolio of mobile chipsets in order to target low-end smartphones in emerging markets.

ARM Holdings is the designer behind many of the most popular energy-efficient chipsets made by companies like Qualcomm and Broadcom.

Intel, however, is one step ahead of the game, and is about to be two steps. As of last year, it’s been producing chipsets about one-half the size (in surface area) of Qualcomm or Broadcom’s chips, meaning Intel can produce chips for about half the cost…and costs will drop further when it transitions to the even smaller ones it has planned.

Aside from cost advantages, smaller chips are also more power efficient. That’s ideal for an iWatch.

Let’s not forget Taiwan Semiconductor Manufacturing. The company owned nearly half of the chip foundry market in 2011, with a virtual monopoly on some larger sized chip fabrications.

Finally, if you like a broader approach, you can invest in semiconductor technology ETFs.

Josh Grasmick
Contributing Editor, Money Morning 

Join Money Morning on Google+

From the Archives…

Australia: The Home of World Beating Dividend Stocks
12-04-2013 – Kris Sayce

Investors: Ignore Japan’s Yen Devaluation Game
11-04-2013 – Murray Dawes

What Japan’s Economic Disaster Means for Australia
10-04-2013 – Dr. Alex Cowie

Gold Bulls About to Win the War
9-04-2013 – Dr. Alex Cowie

A Better Inflation Bet Than Gold…Stock Market Investing
8-04-2013 – Kris Sayce

The Gold Meltdown – What Happened?

In today’s Trade School video, we’re going to be looking into what caused the recent meltdown in gold prices. How could gold drop so precipitously in such a short time, given what’s going on in the world? Did it have anything to do with the ETF GLD or was a country forced to sell its precious metals to satisfy creditors?

I will share with you how you could have systematically made money in gold using our Trade Triangle technology, which has produced some very positive results over the years.

Since 1975, there have been 13 bear markets with an average drop around 14%. This would put gold below the $1,300 level, around $1,280.

In this short 4 minute video on gold, I will illustrate the importance of having a solid game plan and a market-proven approach. We will go through each trade in gold and share with you the results of using our Trade Triangle approach from the beginning of the year.

This approach is not for everyone, but we think you will agree that the results certainly speak for themselves.

For more information on the tools I use in this video visit: here

Adam Hewison
President, INO.com
Co-Creator, MarketClub

By The Sizemore Letter

The “Little Books” series has produced several memorable titles, such as Joel Greenblatt’s The Little Book that Beats the Market.  Greenblatt offers a mechanical investing strategy that involves very little work on the part of the reader.  You simply build a portfolio of 30 stocks from his screener and re-run his “Magic Formula” screen on an annual basis.

Hilary Kramer’s Big Profits from Small Stocks is not that kind of book.  Kramer does not offer a trading strategy or a proprietary screener.  Instead, she teaches her readers how to think for themselves.

Kramer, herself a Wall Street veteran, has carved a niche for herself in an area where most professional money managers are afraid to tread: low-priced stocks trading for less than $10 per share.

As Kramer points out, most mutual fund managers and other institutional investors could not buy low-priced stocks like these even if they wanted to; their investment mandates forbid it.  But even if they have the ability, few have the intestinal fortitude.  Their own research departments generally won’t cover the stocks, and it’s a career risk to buy a stock that is too far out of the mainstream.  As the old saying goes, “no one ever got fired for buying IBM.”  But if a manager bets big on a smaller company that ends up going bust, they might be out of a job.

Not all low-priced stocks are good buys, of course.  As Kramer writes, “Many stocks under $10 are cheap because they deserve to be.  They are dogs that never had potential, were permanently damaged by the recession, of have misstepped so badly they have no hope of ever getting back on track.”

Still, there are potential gems for those investors willing to do the research and look.  It is here that you’re most likely to find a “break out” stock.  Due to the mechanics of the market, it’s generally a lot easier for a $5 stock to go to $10 than for a $50 to go to $100.  Yes, the percentages are the same.  But lower-priced stocks tend to be low-capitalization stocks as well.  A large institutional investor like a Warren Buffett moving into a small cap stock is going to move the price a lot more that he would in a large, liquid stock with an enormous float.  The key is finding these gems before the big boys do.

Kramer notes that low-priced stocks are a great place to find fallen angels, or large (formerly) blue chip companies that have fallen out of favor for various reasons, such as missing an overly optimistic earnings forecast or lack of direction from management.  In looking for a fallen angel, you have to ask two questions: What went wrong? And can it be fixed?

Kramer gives the example of Ford, a stock that she bought during the pits of the 2008-2009 crisis.  It’s pretty easy to see what went wrong with Ford.  Their product line had gotten stale, they owned too many non-core brands, they had too much debt, and they had obligations to the United Auto Workers they could never hope to honor.  But could these be fixed?  Well, at least in the short-term, yes.  Ford revamped its lineup, sold off some of its non-core brands, and restructured some of its debts and union obligations.  Oh, and in the process, Kramer’s investment soared from $2 per share to $18 two years later.

You cannot do a screen for fallen angels and buy them as a group.  You really have to examine each on a case-by-case basis and make a judgment call.  There are, alas, no short cuts!

All large companies start small, and low-priced stocks are often a good place to find up-and-coming growth stocks. Often times, these are going to be companies in non-sexy industries, such as junkyards or waste collection.  Though Warren Buffett usually buys larger companies, some of his outsized returns over the years have been due to his willingness to buy companies in “boring,” unglamorous industries.

Finally, low-priced stocks are a great place to find companies in the “good old bargain bin,” or companies selling for less than their book value.

Kramer identifies two sectors in particular that tend to be good hunting grounds for low-priced stocks.  The first is one that I would advise caution in exploring: medical and biotech stocks.  Biotech stocks often have “binary” outcomes.  They produce a new “it” drug and enjoy returns of hundreds or thousands of percent or they don’t, and they end up going bust.  Still, if medical technology is an area of expertise for you, it might be worth your while to give these stocks some attention.

Kramer’s other hunting ground is one that I am a fan of myself—emerging markets.   With Europe, Japan and the United States all mired in long-term debt and demographic problems, emerging markets will be some of the few reliable sources of growth in the years ahead.

But here too, you need to be careful.  What makes these stocks potentially attractive is that they are not widely covered by Wall Street.  But part of the reason they are not covered is that they don’t have much in the way of public reporting, and what they do have may or may not be in English.

Plus, you might have a hard time buying them.  Many do not trade in the U.S., or if they do it is on the “over the counter” markets, which tend to be thinly traded.  So, you’ll need a broker that will give access to foreign exchanges.

A low-priced investment strategy is a value approach of sorts, but it is different from the sort of value approach that many investors are used to taking.  For example, Kramer maintains that the price/earnings (P/E) ratio, which is a basic metric known to all value investors, is generally not applicable to the low-priced stocks she covers:

“We are looking for signs of improvement and plans to continue or return to a growth trajectory.  For example, the P/E ratio isn’t going to help us pick these kinds of stocks.  After all, the P/E ratio requires the current share price and the earnings per share price for a stock.  And often low-priced stocks have little to no earnings at the time they are poised to become breakout stocks, or show earnings that are cyclically depressed”

As a case in point, Ford had P/E ratio of 88 when Kramer bought it because its earnings had been gutted in the crisis.  You don’t really care what the earnings were yesterday; you want to estimate what they will  be tomorrow.

There is a lot of investing wisdom in the pages of Big Profits from Small Stocks, and Kramer has chosen her hunting grounds well.  I don’t always pay attention to academic work in finance because a lot of it is nothing more than a very sophisticated way of stating the obvious.  But there was one 1992 landmark paper by Eugene Fama and Kenneth French titled “The Cross Section of Expected Stock Returns” that basically proved that value investing and small-cap investing outperform over time.  Kramer’s low-priced stock approach is really a small-cap value strategy.

In any event, Kramer’s approach will work best during or immediately following a crisis, when the market is full of fallen angels that were the proverbial baby thrown out with the bath water.  During times of relative market calm—such as today—there are simply going to be fewer opportunities and the ones that are out there will require more research to find.

I recommend you keep Kramer’s book on your shelf and give it a read next time we get a good market sell-off.

SUBSCRIBE to Sizemore Insights via e-mail today.

By Bill Bonner

Whoa! On Friday, gold got whacked hard – down $63. It’s barely holding above $1,500.

Is this the end for the bull market in gold? Everybody says so. From The New York Times:

In Pocatello, Idaho, the tiny golden
treasure of Jon Norstog has dwindled… A $29,000 investment that Mr.
Norstog made in 2011 is now worth about $17,000, a loss of 42%.

“I thought if worst came to worst and
the government brought down the world economy, I would still have
something that was worth something,” Mr. Norstog, 67, says of his foray
into gold.

Gold, pride of Croesus and store of
wealth since time immemorial, has turned out to be a very bad investment
of late. A mere two years after its price raced to a nominal high, gold
is sinking — fast. Its price has fallen 17% since late 2011. Wednesday
was another bad day for gold: The price of bullion dropped $28, to
$1,558 per ounce.

And this was before gold tumbled on Friday.

We can barely stop laughing.

This sad sack “investor” thought he would make money by putting $29,000 into gold stocks.

Ha-ha. Wrong on all counts. He thought gold was an “investment”… he
thought an amateur speculator could make money in gold stocks… and The New York Times thought he was an investor.

And now The New York Times thinks gold is going down. Why?

Now… things are looking up for the
economy and, as a result, down for gold. On top of that, concerns that
the loose monetary policy at Federal Reserve might set off inflation — a
prospect that drove investors to gold — have so far proved to be
unfounded.

So Wall Street is growing increasingly
bearish on gold, an investment that banks and others had deftly marketed
to the masses only a few years ago.

Ha-ha. Do you remember Wall Street deftly marketing gold to the
masses a few years ago? Show us the ads! Give us the brokers’ phone
logs! Prove it!

The fact is, the masses never got anywhere near gold. Not even close.
Most people have never seen a gold coin… and few are as reckless as
the aforementioned Mr. Norstog. Most are even more reckless! They’ll
wait for gold to hit $2,000… or $3,000 before they buy.

Which is why we’re nowhere close to the top. Wall Street never
marketed gold deftly… or any other way. Not even in its usual greedy,
heavy-handed fashion. And the masses never bought it.

Just the opposite. As the price of gold rose, we saw ads in the paper
soliciting people to SELL gold. The masses held gold parties… in
which they sold their golden heirlooms at preposterously low prices.

And those concerns that money printing by central banks would cause trouble that have “so far proved to be unfounded”? Well, stay tuned!

The Good News About Gold

More good news from the NYT:

On Wednesday, Goldman Sachs became the
latest big bank to predict further declines, forecasting that the price
of gold would sink to $1,390 within a year, down 11% from where it
traded on Wednesday. Société Générale of France last week issued a
report titled “The End of the Gold Era,” which said the price should
fall to $1,375 by the end of the year and could keep falling for years.

Why “good news”? Because the more bearish on gold Wall Street
becomes, the more the rubes and pumpkins sell. The more they sell… the
cheaper it is for the smart money to buy.

Yes, dear reader, we hope Goldman and SocGen are right. We’d like to see gold crash down around $1,300… or lower.

First, because this would mark a real correction in the bull market.
It’s been going on for 12 years without a serious correction. Not a
healthy situation. We’d like to get the correction out of the way…
shaking out the Johnnies-come-lately and the two-bit speculators. Then,
the final stage in the bull market could begin.

Second, because it gives us a chance to buy more. Because no matter
what noise you hear in the press or in the street, central bankers are
far more reckless than Mr. Norstog. The monetary authorities are
convinced that they can revive sluggish economies by printing money…
and they’ll continue printing until all hell breaks loose.

Then, when the dust settles… when pounds, pesos, yen, euros and dollars have all been beaten and bruised… there will be one currency still standing tall. That will be gold.

Regards,

Bill

Gold was hit hard last week dropping by 5-6 pct. Senior Strategist Ib Fredslund Madsen explains why japanese banks plays and important role in the sell-off.

Legal information

Video courtesy of en.jyskebank.tv

London Gold Market Report
from Ben Traynor
BullionVault
Monday 15 April 2013, 06:00 EST

SPOT MARKET gold prices fell to a two-year low below $1400 an ounce Monday morning, extending Friday’s drop that took gold into bear market territory under the definition of a 20% fall from its peak.

Silver fell as low as $23.11 an ounce, its lowest level since October 2010, as stocks and commodities also fell while the Dollar gained.

Gold in Sterling meantime also fell to two-year lows near £900 an ounce, while gold in Euros fell to €1061 an ounce, its lowest level since July 2011.

Last Friday saw the Dollar gold price end the day down 5%. By late Monday morning in London gold had dropped another 6% from where it opened in Asian trading this morning.

“Previous episodes of gold dropping more than 3% in one day were typically followed by either a sharp rebound or a period of consolidation,” says a note from UBS.

“Given the forcefulness of the move over the last couple days, some correction may be in store up ahead. But given the damage to market sentiment, gold would have to work that much harder to rebuild trust. With no clear catalysts expected in the immediate future, the burden falls on physical markets and long-term holders: how they respond to these lower levels will be key in determining gold’s journey from here.”

The world’s largest gold exchange traded fund SPDR Gold Trust (ticker: GLD) ended Friday with 1158.6 tonnes of gold backing its shares, the lowest volume since April 2010.

Over in India, the world’s biggest gold buying nation traditionally, gold imports in the first quarter of the year were down nearly 24% from the same period last year, according to the Bombay Bullion Association. In January India’s government raised the import duty on gold to 6%.

Compared to the start of last week, the gold price is down around 12%, while silver is down 15%.

“The demise of gold is still at an early stage,” reckons ABN Amro commodities strategist Georgette Boele.

“Other assets will become increasingly more attractive as the growth outlook improves.”

“Some of the key pillars of the gold bull market look like they’re suffering fatigue,” adds Peter Richardson, chief metals economist at Morgan Stanley Australia.

“The gold market’s probably started to price in the prospect that beleaguered members of the Eurozone might be forced to sell gold to raise part of the funding, and there are much bigger holders in that category than Cyprus.”

“This may be the correction that gold needs,” Suggests legendary hedge fund manager Jim Rogers.

“If it goes down enough, I will start buying it.”

“I love the fact that gold is finally breaking down,” adds Gloom, Boom & Doom Report publisher Marc Faber, “because that will offer an excellent buying opportunity…the bull market in gold is not completed.”

The Greek economy meantime is expected to return to growth by 2014, the troika of international lenders the European Commission, the European Central Bank and the International Monetary Fund said Monday.

Over in China the Shanghai Gold Exchange said Monday it may increase trading margins on gold and silver contracts as a result of sharp price falls.

China’s economy meantime grew at an annualized rate of 7.7% in the first quarter, down from 7.9% in the final three months of 2012, official figures published Monday show.

“Industrial production is unexpectedly weak and that’s the source of weakness in GDP,” says Tim Condon, Singapore-based head of Asian economic research at ING.

“Based on this, the consensus forecasts for GDP are going to be headed lower and we’ll certainly be looking at ours.”

Ben Traynor

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

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By WallStreetDaily.com

I know that James Surowiecki achieved “bestsellerdom” in 2004 by telling us that there’s wisdom in crowds. That, collectively, humans make much more informed decisions than individuals.

What a total crock! (At least when it comes to investing.)

As Humphrey B. Neill observed, “When everybody thinks alike, everyone is likely to be wrong.”

And there’s no better proof of this than investor sentiment.

As I shared in July 2012, when bullish sentiment hits extreme lows, stocks almost always rally.

Well, guess what? Bullish sentiment just cratered.

Bulls Run Scared

Every week, the American Association of Individual Investors (AAII) measures investor sentiment. And the latest bullish sentiment reading ranks as nothing short of jaw dropping.

It plummeted 45%, from 35.5 to 19.3. That’s the largest weekly drop in over a decade, folks.

What gives? I mean, stocks just hit another record high, and suddenly investors don’t feel bullish at all?

So much for embracing the notion that the trend is our friend.

Here’s what you need to know… I’ve said it before, and I’m sure I’ll say it again – when virtually no one is optimistic about the stock market, that’s all the more reason we should be bullish. Just take a look at the data and tell me you disagree…

As you can see, when the AAII bullish sentiment reading drops below 25% during the current bull market, stocks (almost) always rally over the next three and six months.

Of course, the latest reading is way below 25%, which got me thinking about what happens when we get really extreme lows.

So I went ahead and analyzed the data all the way back to 1987 – the year AAII started tracking sentiment.

My findings are equally compelling. (But only for those of us with the guts to be contrarians and ignore the “wisdom” of crowds.)

More Evidence You Should Ignore the Masses

Since 1987, bullish sentiment has dipped below 20% on 26 separate occasions. So you can’t dismiss the findings as anomalies.

And just like today, when bullish sentiment readings are extremely low, the implications for stocks couldn’t be more, well… bullish!

• For 24 out of 26 occurrences, stocks jumped higher three months following a low sentiment reading. That works out to 92.3% of the time. The average gain? 6.5%.

• And for 25 out of 26 occasions, or 96.2% of the time, stocks shot higher six months following a low sentiment reading. The average gain? An impressive 13.4%.

Such much for the wisdom of crowds, huh?

Bottom line: You’re not going to find a more accurate contrarian indicator in the market. When bullish sentiment tanks, forget bailing on stocks. Consider backing up the truck, instead.

Or as Bespoke Investment Group wrote in a note to clients, “The historical evidence suggests that investors who turned bearish may want to change course.” True that!

Ahead of the tape,

Louis Basenese

Article By WallStreetDaily.com

Original Article: When This Indicator Hits 19, Stocks Always Rally… And it Just Did Again