The Next Market Correction Will Trigger Record Gold ETF Demand
Precious metals investors should be prepared that a subsequent vast marketplace improvement will expected means record bullion ETF direct with many aloft prices. Once a Great Hyped Trump Rally runs a march and a lousy fundamentals are authorised to flog in, a broader batch markets are going to knowledge one ruin of a correction.
And with that correction, we will knowledge another large swell in Retail Gold ETF demand, usually as we did behind in Q1 2016. Even yet Gold ETF direct is paper driven market, it is instrumental in pulling a bullion cost extremely higher.
This is accurately what took place final year when a Dow Jones Index corrected by some-more than 2,000 points during a initial entertain of 2016:
This draft shows a disproportion in Gold ETF flows during Q1 2009 when a Dow Jones fell 25% to a low of 6,470 points. Investors who suspicion a universe was entrance to an finish as Jim Cramer on CNBC was revelation his viewers that “NO END TO THE CRASH WAS IN SIGHT” were flocking into Gold ETF’s in a large way. During a Q1 2009, a record 465 metric tons of bullion (supposedly) flowed into Gold ETF and Funds.
NOTE: During a article, we will be describing Gold ETF and Funds usually as Gold ETF flows. However, a total should embody all Gold ETF’s and Funds.
Now, review what seemed like a unequivocally frightful marketplace pile-up of 2009, to what took place during Q1 2016. The Dow Jones usually fell 11% during a initial entertain of 2016, though 342 metric tons issuing into Gold ETF’s pushed a bullion cost adult $200. This was a tip volume of flows into Gold ETF’s given a record high in Q1 2009. But, what done sell investors so aroused to pierce into Gold ETF’s on usually a tiny 11% correction? And we contingency remember, this improvement took place from a Dow Jones tip of 18,000 points.
Something has severely altered in a bullion marketplace this year and we trust that many investors are unknowingly of how bomb this change could impact a cost of a yellow steel going forward.
Again, something unequivocally spooked investors to group into Gold ETF’s on a tiny 11% improvement in a Dow Jones Index. What happens when we see Dow Jones Index suffers double or triple that 11% correction??
This subsequent draft shows a quarterly net Gold ETF flows given 2010:
There are several critical factors to see in this chart. First, from 2013 to 2016, a net bullion flows out of Gold ETF’s were 1,228 metric tons. This was due to a bullion cost descending from $1,700 in a commencement of 2013 to a low of $1,070 during a finish of 2015. we am one of a analysts that trust a bullion cost during this time-period was deliberately smacked down on purpose.
Proof of this, was shown in a draft sent to me by one of my readers that we published in my new article, THE GREAT PRECIOUS METALS DISCONNECT: A Ticking Time Bomb, that settled a following:
The draft is a Silver-Gold ratio (RED LINE) compared to a SP 500 Index (BLACK LINE). Take note, this is not a Gold-Silver ratio, though a opposite. As we can see, a Silver-Gold ratio line has paralleled a SP 500 from 1997 to 2012… unequivocally closely. However, when a Fed announced QE3 during a finish of 2012, something utterly engaging took place. The Silver-Gold ratio continued reduce towards a bottom level, though a SP 500 Index surged ceiling to a new record high.
If a apportionment of a QE3 supports found a approach into bullion and silver, well… that could have been unequivocally ugly. We would have expected seen some-more record-breaking prices due to surging earthy and sell demand. Thus, a pound down of gold, authorised much-needed earthy bullion to enter a market. Unfortunately, this FED TRICK is not one that they can repeat again.
Okay, let’s get behind to a Quarterly Gold Flows draft above. Secondly, we can see that in Q1 2016, when a Dow Jones Index corrected reduce by 11%, flows into Gold ETF’s surged to 342 metric tons (mt). Now, over a following quarters, flows into Gold ETF’s were strong, though continued lower. This was due to a marketplace realizing a MARKET WAS NOT GOING TO CRASH YET. Furthermore, as a marketplace satisfied that Trump was going to be President, a batch marketplace conduct behind towards a moon that caused net Gold ETF outflows during Q4 2016.
So, if we demeanour during what has taken place in annual Global Gold ETF flows given 2010, this would be a result:
As a bullion cost continued aloft from 2010 to 2012, flows into Gold ETF’s remained positive. However, during a bullion cost take-down, there were net Gold ETF outflows. The engaging thing to notice in this draft is a outrageous spike adult in Gold ETF direct to 532 mt in 2016. Again, some-more than half of that 532 mt figure came usually in a initial entertain of 2016 when a Dow Jones fell 2,000+ points.
The Dow Jones is now trade during 20,270, another 2,200 points aloft than a spin during a commencement of 2016. According to a essay by WolfStreet.com, Dow Companies Report Worst Revenues Since 2010, Dow Rises To 20,000 (LOL):
What a float it has been. From a commencement of 2011 by Jan 27, 2017, so a small some-more than 6 years, a DJIA has soared 73%, from 11,577 to 20,094. Glorious!!
But when it comes to revenues of a 30 Dow member companies – a existence that is harder to alloy than ex-bad-items practiced earnings-per-share hyped by Wall Street – a design turns morose.
This means a broader batch markets, being hold adult by a lot of HOT AIR, are being primed for one MOTHER of a crash. If investors flocked into Gold ETF’s during Q1 2016 on a tiny 11% Dow Jones correction, what is it going to be like when we finally knowledge a GUT WRENCHING CORRECTION?
It looks like 2017 will spin out to be one scattered year. The some-more President Trump stirs adult a GOVT POT, a some-more expected a DUCT TAPE, BAILING WIRE and GUM holding all together will start to unravel.
Lastly, we would like to remind all a “Intellectual” sell investors who trust bullion is zero some-more than a meaningless 13th century “Barbarous Relic”, GOD HATH A SENSE OF HUMOR…
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