Saturday, January 2, 2016

Selling Pressure In Gold Is Dissipating

There are many signals indicating that selling pressure in the precious metals sector is dissipating. One of these signals is visible on the chart below:

The chart shows that between 2009 and 2011, despite the ongoing bull market in gold, investors were less and less interested in acquiring gold (the green arrow). In 2009 GLD, the biggest world's ETF investing in physical gold, increased its gold holdings by 353 tons. In 2010 these holdings increased by only 147 tons but in 2012 the investors withdrew 26 tons from the fund. Then, in 2012 we saw the beginning of the current bear market in gold.

In 2013 as many as 553 tons of gold were withdrawn from GLD. This year was also the worst time for gold bugs - gold lost 23.2% in its value against the US dollar.

However in 2014 and 2015 investors withdrew only 89 and 69 tons of gold, respectively (the blue arrow). Despite the fact that gold was still losing its value against the US dollar, the selling pressure was not that high as, for example, in 2013. In my opinion, it is the light at the end of the tunnel for gold bugs.

Another big gold ETF, IAU, demonstrates a similar pattern:

The dissipating selling pressure in these two big gold ETFs may be an indicator of the end of the bear market in gold. On the other hand - the dissipating selling pressure is not a signal that a new bull market in gold is starting.

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