ETFs mentioned in this article include GLD, IAU, SLV, DGP, UGL, and AGQ.
Gold fell $54 Thursday. Most gurus were expecting gold to go up due to increasing instability in Europe.
Spain conducted a dreadful bond auction, in which it was forced to pay 6.975%, just shy of the 7% benchmark. Interest rate of 7% is considered unsustainable. Bid-to-cover ratio was 1.5 compared to 1.8 last month for a similar bond. The lower the bid-to- cover ratio, lower the investor demand.
The worst part of the Spanish auction was that the government was not able to sell all the bonds it wanted to sell. This spooked the markets all over the world. On such a day filled with panic, it was reasonable to assume that gold would go up, instead gold plunged.
The real reason for the plunge in the gold is speculation that International Monetary Fund (IMF) will be selling gold.
The IMF is one of the largest owners of gold in the world, holding 90.5 million ounces or 2,814.1 metric tons of gold.
The IMF has a history of selling gold, however recent sales have been to central banks of Bangladesh, Sri Lanka, Mauritius, and India. Will IMF sell gold in the open market is an open question.
Considering the worsening situation in Europe, IMF selling gold to help Europe is a distinct possibility especially since Germany has declared its gold untouchable. Bundesbank, the central bank of Germany recently issued a statement opposing any gold sales. It is worth noting that in Germany, gold is kept under the independent oversight of the Bundesbank…Read More at Forbes
