Gold (Excerpt)

That was a very bad break for gold on Friday. The nearby futures contract price plunged $63 to $1,501 an ounce, down 20.5% since its record high of $1,889 on August 22, 2011, and the lowest level since July 4, 2011. Other precious metals prices also dropped sharply that day. That’s a bit surprising given that a week ago, the BoJ announced plans to double its balance sheet over the next two years, which should have been bullish for precious metals. Obviously, when they failed to rally on this news, the path of least resistance was downwards. Similarly, the price of gold fell in February despite a bullish Valentine’s Day press release from the World Gold Council.

In the 2/21 Morning Briefing, I wrote: “Over the past few years, I’ve been asked on several occasions about my opinion on gold. I responded that my problem with gold is that I only know how to value assets with coupons, dividends, or earnings. I also observed that the price of gold had already increased sevenfold since January 20, 2001. … It has been a crowded trade, as evidenced by the high levels of net long positions held by both large speculators and small traders, according to the Commodity Futures Trading Commission. With so many bulls around, the lack of upside price momentum since late 2011 must have convinced some of them, especially the big hedge funds, to lighten up.” They lightened up some more on Friday.

Today's Morning Briefing: Back to the Future. (1) The 1990s and now. (2) US looks fairest of them all. (3) What about Japan and China? (4) Heavy metals. (5) Bullish news depresses gold. (6) Upside for US in commodities’ downside. (7) When supply exceeds demand. (8) Fracking adds up. (9) Trend still up for retail sales. (10) S&P 500 Retailers should continue to outperform as forward earnings rises to record high. (11) “The Place Beyond the Pines” (+ +). (More for subscribers.)