The Trouble with Gold...

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The Rude Awakening Thursday, February 28, 2013 | 0900 Hours The Trouble with Gold... Ugly outflows punctuate a selloff... Are lower prices in gold's future? Plus: Capping off a weird week for stocks... Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner Late last year, gold investments were flying high... December marked a new record in gold holdings by popular exchange-traded funds. Spot gold hovered around $1,700. The 12-year golden bull appeared alive and well. That's where the trouble started. Some analysts believe gold has become too tradable with the invention of ETFs that offer investors exposure to the physical metal. With ETFs, momentum traders can easily gain exposure to physical gold and hop right off if they don't like the ride. And now that we've seen the first signs of a gold sell-off, evidence is mounting in favor of lower gold prices in the coming weeks and months. One of the market's inconvenient truths is that one wave of selling can inspire countless other investors to run and hide. The same herd mentality that pushes prices skyward can also send them crashing down. That's true of anything you trade on an open market--even gold. This selling pressure has revealed itself through these easily-tradable ETFs. Total known ETF holdings of gold-- a metric tracked by Bloomberg--has plummeted this month along with the price of the physical metal. Take SPDR Gold Trust Shares. The world's largest gold-backed ETF is working on its biggest monthly outflow since its inception in 2004... "As a gauge of investor interest, holdings of the SPDR Gold Trust... fell around 2.5 tonnes from the previous session to 1,270.44 tonnes on Feb. 26, in its sixth session of decline," reported Reuters earlier this morning. That's a lot of supply flooding into the market... I already warned you about gold's initial sharp decline from $1,650. At this point, I do not see how gold can quickly recover its momentum. Look for additional wild price swings over the next few weeks. If you own one of these big gold ETFs, it might be time to hit the road. Rude Numbers Targets, Predictions and Wild Guesses $1,589 will buy you an ounce of gold this morning. $29 will get an ounce of silver. 2 big reports--initial claims and GDP--could sway the markets today... $18 is just enough to pick up one share of J.C. Penney stock this morning. The retailer reported big losses as annual revenue dropped to $13 billion, its lowest since 1987, according to Bloomberg. 64% of stocks traded on US exchanges remain above their 50-day moving averages. Rude Trends When to Buy... When to Sell Stocks reacted favorably to solid data yesterday. The broad market pushed higher until a quick pullback in the last few minutes of trading. The Dow transportation index and homebuilders led the move higher. These two groups were leaders before the big pullback earlier this week, so it was good to see them take charge again.   You're going to see a ton of commentary about a potential market correction vs. a move to new highs. It's unavoidable. But it's also important to keep it all in perspective. It's easy to get sucked into the bull versus bear talk churned out by the financial media every hour. But this information won't help you trade or invest. Stay objective and see where the chips fall. I'll keep an eye on the charts for you... [Ed. Note: Follow me on Twitter: @GregGuenthner or you can send me your feedback the new old-fashioned way here: rude@agorafinancial.com] Ignore At Your Own Peril Today's Must-Read Links What's gray, dusty and worth 4 times more than gold? WARNING: You might not know it -- yet -- but Obama's White House and Congressional Republicans just sold you up river... The largest financial bubble in history may be about to pop... 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