Chart for 1 March 2013 market close.
MS has continued falling. The MS down trend dating back from early October, 2012 is making new nows. MS is, in short, terrible and is roughly equal to the MS back in early July 2012.
Physical deliver of gold is however rather bullish for the metal:
As of 1 March 2013, the Shanghai Gold Exchange (SGE) has reported a total of 513 tons of gold delivery since 4 January 2013. Based on World Council Gold production reports, the world's gold production is estimated to be 487 tons start of year to 1 March 2013 (world gold production numbers are based on 2012 world production converted to a daily rate with an expected production growth factor based on observed TSX/TSXv gold miner production growth).
The SGE response to the paper gold smash for the week ending 1 March 2013 was to take 19.2 tons of gold delivery on 1 March 2013 (see Shanghai Gold Price (March 1, 2013), units converted from Kg to tons). It is important to remember that the SGE is just one gold delivery market in the world and that world gold production is approximately 8 tons per day. I provide daily updates on the Shanghai Gold Exchange on my prices web page.
While it is certainly true that the SGE gold delivery numbers do not factor in the velocity of gold -- that is are the same ounces being sold, delivered, sold, delivered, etc over the course of the year, with delivery volumes on the order of annual world gold production, something is definitely up with gold in Shanghai and China. Is Shanghai on track to deliver gold in excess of 100% of the worlds' gold production in 2013? The data to date suggests, yes!!
So what about about the recent sell off in gold? My conclusion is that the gold sell off is purely a paper event which will prove meaningless if the physical deliveries on exchanges such as the SGE continue at current year to date rates. A twitter exchange with @JamesGRichards, author of Currency Wars, tells the real story IMO:
22 February 2013: @JamesGRichards: If China had option [to] trade US dollars for gold at current prices, would they do it? If yes then gold [price] drop was a gift to China.
22 February 2013: @goldminerpulse Yes and yes. The gift is by design until #China catches up with #Russia, #Europe & #US in #gold sweepstakes.
The MS is clearly down for the week ending 1 March 2013, approaching the lows for which I have data -- MS calculations require extensive daily data on all TSX/TSXv gold producers making calculations for earlier dates prohibatively expensive which is why I am unable to share data for the first part of the year.
The Price of Gold (POG) drop, when reviewed in terms of physical delivery on just one gold exchange as discussed above, appears to be paper driven and not reflective of real market. The COMDEX paper gold casino market will no doubt continue with paper gold prices but at some point, probably sooner than later, the physical delivery market will set the price of gold. Even recently, the price of gold in Shanghai trades at a $10 to $30 premium over prices shown at Kitco.
The Kitco Gold Survey of market participants completed 1 March 2013 has 45% of the participants bullish while 28% are neutral/bearish. Taking the Kitco survey results as a contrary indicator suggests next week is more likely to be neutral (trendless trading) or bearish.