We received several inquiries about why gold is declining. Our view is gold is retrenching because:
- UK QE has ended (for now)
- US QE will end in three weeks (for now)
- The ECB did a massive €295B drain (can you imagine the market reaction if Bennie Mae drained $500B in one shot?] - China is signaling that it wants to rein in inflation by tightening credit, hiking real estate down payments to 50% and allowing the yuan to appreciate
- Europe’s sovereign debt crisis has ebbed (for now)
- Food commodities have broken down
- Gold stocks have greatly underperformed gold since mid-January (gold stocks tend to lead) S&P
S&P 500 Index, Gold and Gold Stocks (GDX) – Gold stocks out-performed gold until late October. Then they traded together until mid-January. Since then gold stocks have under-performed gold.
Source: The Big Picture, March 12, 2010
