Thursday, July 17, 2014

Gold Price Responds to Disaster News

Gold is a really old metal.  It's been around longer than any of us and it has a mind of its own in the markets.  Forget for a moment the recent news about bankers fixing the daily spot price of gold.  Daily spots can't suppress market pressures forever.  Headline news is still a demand factor when something happens to spook traders.

Today's shoot-down of a Malaysian airliner over the Russia-Ukraine conflict zone was bad news.  Some idiots with too much firepower and not enough brainpower have just escalated a local conflict into a global incident.  Forbes noted that the airliner incident drove up the spot price of gold.  In a similar vein, CNN notes that Israel's ground attack in Gaza made the VIX volatility indicator move up.  Escalating conflicts in more than one global hot-spot drive investors away from risky equities and towards hard assets, at least for the short term.  

Real-world drivers of sharp moves in commodity prices make me discount other commentators' claims of ongoing gold price conspiracies.  Paul Craig Roberts wrote yesterday about how big banks supposedly collude to drive down the gold price with COMEX futures contracts.  I'd like to see how he explains today's rising gold price in light of his conspiracy theory.  GATA also has some explaining to do.  

A real conspiracy would be able to smack down the gold price immediately.  The contract volume on COMEX would have to rise appreciably to indicate this counteraction was in the works.  Come on, gold bugs, there's more to price action than paper claims on COMEX traders' bullion repositories.  Surprises in the real world count for much more than hedging.