Is Today's Plunge in Gold Prices The Start Of A New Sustained Slide?

Gold prices fell 2.2% today to a 15-week low. Today's loss was the single biggest dollar decline in the yellow metal so far this year.

Should gold bulls be worried that a major new downtrend has begun? The answer, of course, is yes! If you are long gold (or related investments), like I am, you have to be crazy not to be worried. However, I think today's decline in gold prices is a red herring. As mentioned in my previous column, dated Saturday, May 24th, I firmly believe that gold is the single "most hated" investment class on the planet right now (and therefore "under-owned" by almost every major asset manager). And one number clearly supports this view.

On Wednesday, May 21st, holdings in the SPDR Gold Trust, the largest bullion-backed exchange-traded product, fell to 776.89 tons, the lowest level since December 2008. Can we conclude from this fact that the "weak hands" have completely liquidated their gold holdings? You bet we can !!

Now, here is the REALLY interesting number. Assets in the same SPDR Gold Trust jumped 1.1 percent today to 785.28 tons, the biggest one-day gain since August 2011! The pendulum appears ready to swing the other way for Gold, with "smart money" now recognizing the "sold out" nature of this market.

In the interest of full disclosure, I aggressively added to my gold/silver mining share positions late today (EXK, GDXJ, GG, & AG). While I am unsure what the catalyst will be to trigger sharply higher gold prices, there are no lack of potential black swans on the immediate horizon to serve this purpose. The biggest trigger of them all, of course, would be a proclamation from China that the Yuan will be backed by Gold. If China wants the Yuan to displace the U.S. Dollar as the world's #1 currency (which it does), then this is one logical path to get it done! Is this even a possibility? I think it's more than a possibility, I believe it will happen within three years! Rumors, of course, will surface well before then, but first China needs to accumulate more gold.

Gold ETF Weekly Chart (symbol GLD) with Downtrend Line & Computer-generated Buy & Sell Signals