PIMCO Buying Gold

Posted at 7:49 PM (CST) by & filed under Trader Dan Norcini.

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Dear CIGAs,

Dow Jones is reporting this morning that PIMCO’s Commodity Real Return Strategy Fund, with about $20 billion in assets, has raised its gold holdings to 11.5% of it total assets from 10.5% two months ago. The position was apparently taken when gold dipped towards $1500 according to comments from Nic Johnson, its co-portfolio manager.

Their concern is a triple one – loose monetary policy, high levels of sovereign debt and rising commodity prices are going to fuel an inflation outbreak as we move ahead.

Sounds familiar doesn’t it?

Here is the point – the chart in gold showed tremendously strong support in gold on any retreats in price down below the $1600 level a short while back. Gold would dip down into these levels but would immediatey attract strong buying and would rebound back higher. WE remarked that this sort of chart action showed ACCUMULATION by deep-pocketed players, whether those were of Asian origin or large investment funds elsewhere. REgardless, these well capitalized players are positioning themselves for what they see coming down the road.

Note, that this is not MOMENTUM BASED buying. That crowd only enters the markets AFTER it starts moving higher and takes out technical resistance levels. They are now coming into gold and into silver. ACCUMULATION puts a floor in a market; momentum based buying drives it higher into a trend.

We’ll need to keep a close eye on the yield on the Ten Year Note to see how that acts as we move forward. If the inflation play is replacing the deflation play, we have seen the lows in interest rates for a very long time.

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