Could be changing?? Gold (GC : NASDAQ : US$1600.70), Net Change: 9.30, % Change: 0.58%
Gold Miners ETF (GDX : NYSE : US$45.66), Net Change: -0.67, % Change: -1.45%, Volume: 13,749,436
Key developments?
Credit Suisse highlights that not only has gold effectively decoupled from European sovereign risk, it has
also become increasingly disconnected from its traditional driver of falling real bond yields rates (the opportunity cost of
holding gold). The U.S. 10-year TIPS yield has continued falling since the end of March without this translating into a higher
gold price (and the TIPS yield alone would appear to imply a gold price of around $1,850). Credit Suisse notes that gold stocks’
12-month forward P/E relative is at a 10-year low and speculative positioning on gold is now the most bearish it has been since
December 2008. Separately on Friday, Eric Sprott highlighted some key developments in the physical gold market that have
taken place over that last couple weeks: 1) The Chinese gold imports from Hong Kong in April 2012 surged almost 1,300% on a
YoY basis; 2) Central banks from around the world bought over 70 tonnes of gold in April 2012. Data from the IMF showed
developing countries such as the Philippines, Turkey, Mexico and Sri Lanka were significant buyers of gold as prices dipped; 3)
Iran purchased $1.2-billion worth of gold in April 2012 through Turkey. As the developed nations continue devaluing their currency
at the expense of developing nations, countries such as Iran, China and Mexico are forced to look at alternative stores of
value; 4) After twenty years of lacklustre returns and stagnant bond yields, Japanese pension funds have finally discovered the
value of investing in gold. The $500-million Okayama Metal and Machinery pension fund placed 1.5% of its assets into gold
bullion-backed ETFs in April in order to "escape sovereign risk"; 5) Reading between the lines of Bill Gross' most recent
statements, the bond king is recommending gold - YES, YES YES!; 6) The Gold Mining ETF, GDX, has seen strong inflows in
the past three months. Sprott believes there has been a material change in the gold investing landscape, and that the significant
macro changes in the supply/demand dynamic of the gold market should propel the price of gold to new highs.