July 5th 2010
Who’s Selling Gold?
Montreal, Canada
Yesterday’s $39 decline in the August gold contract makes me wonder just who exactly is unloading bullion in this increasingly uncertain economic environment. With the EUR surging, hedge funds and trading desks at major banks might have felt compelled to unwind their gold hedges. Even after Thursday’s EUR rally, gold prices are up 24% in EUR terms in 2010.
But with the U.S. dollar logging one of its biggest single day declines on Thursday, I’m sort of confused why gold prices would fall almost 4% and not rise amid dollar weakness. The EUR rally doesn’t explain everything.
In addition to traders dumping gold, my best guess is that some government-controlled conduit, perhaps the International Monetary Fund (IMF), entered the market and sold gold. The IMF has been looking for other buyers since selling a few hundred tons of gold to India and other regional central banks in the Indian sub-continent in late 2009; I’m not convinced the IMF wants to control its velocity of gold sales so it doesn’t disrupt the market. On the cont