<p>Well, traders sell for various reasons but a few come to mind:</p>
<ul>
<li>Selling gold profits to raise cash to deal with equity losses elsewhere</li>
<li>Gold producers selling what they produce</li>
<li>Gold shorts betting that gold goes down</li>
</ul>
<p>There’s a rumor going around that COMEX bars are oversubscribed by a factor
of ten (ten claims per inventory bar). I just glanced at an article from
GATA. No clue if it is true or not but that would be one way to sell a lot
of gold without having to actually have it.</p>
<ul>
<li>A lot of trading transactions are paper-only. You make your paper profit
and take your profits in FRNs.</li>
</ul>
<p>Far beyond “norminal” oversubscription of physical bars…</p>
<p>Commodity exchanges can dump gold debts on ETFs</p>
<p>"GATA board member Adrian Douglas discloses in the report below, titled “The Alchemists,” that the New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold. </p>
<p>Thus it is likely that the paper claims to the world’s supply of gold are greater than even GATA has suspected – that the gold supply is even more oversubscribed and that “paper gold” is being created at an ever more frantic rate to suppress gold’s price."</p>
<p>A lot of the action in futures these days in commodities is financial, people taking up positions have no intent of buying the said commodity or selling the actual product, they are doing it as part of a broader financial strategy involving options, derivatives and futures on a given product (I am not familiar directly with gold, but am with other products). It wouldn’t surprise me if gold futures are overbought/sold at all, given the nature of trading these days.</p>
<p>As to why the price of gold might be declining, I could guess at a number of things. If traders feel that with the downgrade of US debt by S and P, interest rates are going to go up, it could lead investors into picking up that US debt, since rising interest rates generally make a currency stronger, since to invest in US debt, investors buy them in US dollars, which in turn makes the currency stronger (likewise, when you buy products made by country A, assuming it isn’t China, that fixes the rate of exchange, that country’s currency goes up compared to yours). If the dollar goes up, the cost of gold goes down if bought in dollars. Could also be that in light of everything else going on, that gold is overbought and this is a correction. Then, too, financial numbers seem to be indicating that the global economy is in a recession, and recession tends to cause devaluation of the price of gold, since inflation fears wane in a recession (demand for goods and services drop, which means the pressure to increase prices drops as well aka inflation). Since oil is dropping in price, and other commodities are dropping, the fear of ‘stagflation’ caused by oil and other commodity prices going up in a recession may be diminishing. </p>
<p>On the other hand, I have learned in 25+ years in the markets, that sometimes it is very hard to figure out why they move as they do:)</p>
<p>The fish at WalMart is processed in the US.</p>
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<p>We routinely shop at Asian grocery stores and avoid just about everything from China.</p>
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<p>I’ve heard bits and pieces of this over the years and only use the
Central Fund of Canada for paper gold purposes. In a true crisis,
though, I’d expect that my shares would get confiscated. At least
the gold part of them.</p>
<p>In the past, the Fed held gold in the US as a custodian for other
countries. I do not know whether countries are that comfortable with
that arrangement anymore. I have heard some countries taking physical
posession of their purchases but I don’t know the relative mix of that
happeneing.</p>
<p>To me, precious metals are something that you buy and hopefully never
have to use. And then you pass it down to your heirs after already
teaching them why you have it.</p>
<p>““I’ve heard bits and pieces of this over the years and only use the
Central Fund of Canada for paper gold purposes.””</p>
<p>Gold doesn’t pay dividends. It is more for an insurance or a trade. CEF is probably the “safest” (relatively speaking) among paper gold. The last time the US confiscated gold in 1933, they still allowed the equivalent of about 5 oz. per person. And talking about custodian of gold in the US, they better audit Fort Knox soon. :-)</p>
<p>Gold just hit a new high of $1699 while oil is in a downtrend. Both are commodities and both are priced in dollars. Both are affected by central banker decisions, yet there is a divergence. </p>
<p>The S&P guy, John chambers, said that it usually takes counties at least years before they get their AAA rating back.</p>
<p>I made another trade but was dumb about it. Put in a bit at 1174 but didn’t get it and chased the bid to 1176. It quickly went back down to 1171. I had a sell at 1178 and it finally got there. Dumb to chase the bid, but it turned out ok.</p>
<p>Group of Seven nations sought to head off a collapse in global investor confidence after the U.S. sovereign-rating downgrade and a sell-off in Italian and Spanish debt intensified threats to the world economic recovery.</p>
<p>The G-7 will take “all necessary measures to support financial stability and growth,” the nation’s finance ministers and central bankers said in a statement today. Members agreed to inject liquidity and act against disorderly currency moves if necessary. </p>
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