Where Did The ETF Gold Go? Around the Necks of Chinese Women

Bill Fleckenstein repeats some of the same ideas he's discussed in the past in this interview (below) with King World News. He makes an important point at the end: when the gold price rebounds and Americans realize they need to own it, the price will break out to new highs because a lot of the gold that was sold went to Asia and isn't coming back.

One of Jesse Livermore's best pieces of advice is to sit tight: don't sell out of a bullish position. Gold falling from $1900 to $1200 is a massive drop in price that warranted selling at the top, but with so many paper alternatives, it made no sense to sell physical gold. Congratulations go to any shorts who sold futures or shorted gold ETFs, but those who sold out of a physical long position may well rue the day when they realize that the gold bars they sold off have been melted down into jewelry being worn around the necks, on the arms, fingers and on the ears of Chinese women. Investment bars that remain for investment have been remelted for Chinese buyers and if real trouble starts brewing, those bars have a final destination in the vaults of the PBOC. Ditto for the gold in India, Turkey, Thailand......

A massive distribution took place from the weak short-term hands to the strong long-term hands and when the trend fully reverses, there will be panic on the part of investors who do not own gold. The turning point may be when some large investor or hedge fund that sold a large position in 2012 or 2013 tries to buy it back and finds it difficult or requires a high premium. This won't cause a jump in the price by itself, but it will be the spark from which a great rally begins.

Bill Fleckenstein, Thursday February 6

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