Wednesday, July 28, 2010
Every now and then TMM has the satisfaction of making money, and making money for the reasons they expect. In macro, that can often be more rare than one may think. To wit, we have only this to say to the gold bugs and other trolls that have occasionally frequented this blog.
Gold has been looking pretty weak for a few weeks now to TMM and not because of politics, religious affiliation or the recently cancelled Indian wedding we heard about from a friend of a friend. Quite simply, the flows into ETFs (much of it composed of retail) seems to have gone a bit flaccid as of late. Orange is spot gold, white is total ounces in all the major ETFs - principally GLD US and GBS LN.
That may look like a small blip on a long ride up to many of you but if you look at 2008 during a short and sharp period of liquidation of positions, gold got brutally beaten down to the tune of 25% - and fast. Similarly, a relatively naive regression of gold against total ounces in ETFs the day before yields a very respectable R-square.