Welcome to the weekend, folks. We've got our usual market analysis today, but as we promised to you in yesterday's newsletter, today we're going to tell you the truth, the whole truth, and nothing but the truth about gold demand. Despite the positive spin the World Gold Council always seems to put on the date, there's just no getting around the facts. On the other hand, it's not like gold is in dire straits here. The supply and demand really do seem to be stabilizing, meaning the price of gold is stabilizing too. It may not be great news for the miners, but it's at least palatable news. Let's paint some broad brush strokes first. In the second quarter, total demand for gold from all regions for all purposes fell 11% from Q1's levels. That's a drop from 1,088 tonnes to 964 tonnes. This year's second quarter total consumption of 964 tonnes was also 16% weaker than Q2-2013's total demand of 1,148 tonnes. Our image below tells the tale. The World Gold Council is correct in its assessment that demand and prices have stabilized. Demand is still broadly trending lower though. This quarter's (the third quarter's) supply and demand pace could really make-or-break the trend. As for where the demand is and isn't coming from now, the next chart makes it clear... the ETF and mutual fund industry once again turned into net sellers of gold, dumping 40 tonnes of the stuff itself. We've seen steeper selling, about a year ago, but 40 tonnes is nothing to sneeze at. Even though the other buyers were still net-buyers in the second quarter, all of these groups except the technology users wanted less gold in Q2 than they wanted in Q1. And, technology is hardly a factor in the change - the quarterly demand there is quite consistent regardless of gold's price. My guess is, gold demand will continue to deteriorate for the remainder of the year and into next year. I don't think expect this drop in demand to be as harsh as the drop we saw over the course of the prior four quarters though. Moreover, I don't expect this net-selling environment to have much of an impact (if any) on gold's price. If you're wondering how you can have less demand for gold without seeing its price drop, the answer is, gold prices aren't completely connected to gold demand. Also baked into gold prices is speculation, which for better or worse was the key driving force behind the 2008-2011 rally and the subsequent 2012-2013 pullback. It really feels like traders are getting bored/weary of the gold trade though, allowing prices to settle down. Speaking of... I don't know if you've noticed this or not, but gold prices are no longer trapped in a wide trading range between $1190 per ounce and $1400-ish per ounce any longer. Over the course of this year, the trading range has narrowed to entrap gold prices somewhere closer to $1300 per ounce. While we expect gold to occasionally ebb and flow above the resistance side and below the support side of this converging wedge shape in the foreseeable future, their effect is still the same - the volatility has been reined in. It looks like the $1240-$1350 lines are the better horizontal range boundaries now. So what's the good news for gold miners? Some of you may already know the answer, but just to make sure we're all on the same page, at a price of $1300 per ounce, most gold miners can dig the stuff up and still turn a profit. It's not a great profit, but a decent one. The average "all in" cost for the mining industry to maintain operations is about $1200 per ounce of gold. The factoid raises the question.... if it only costs $1200 to mine an ounce of gold, how come so many gold mining stocks were getting crushed in 2012 when gold prices were still well above that level? The answer is simple. At that time, gold prices were falling and there was no guarantee the selloff was ever going to end. Investors couldn't afford to risk gold prices not stabilizing around $1200 at the time, so the mentality was just one of "get rid of 'em". Now with gold getting comfortable around $1300, though we'll still see volatility, it's not scary volatility. Miners can make a buck or two even if gold stumbles back to the lower end of the likely range around $1240. We're not ready to buy a gold miner or a gold mining ETF just yet, but it's on the radar. Now, let's talk about stocks. On the Fence OK, time to acknowledge a mistake. Yesterday I said today would be D-Day, where the market would either have to break out or break down. I should have considered the third possibility, that stocks would do nothing. And that's exactly what they did today when all was said and done... nothing. Oh, we saw a higher high and a lower low, but the S&P 500 ended the session right where it ended Thursday's. So now what? Above all else we need to know this is a precarious time for the market. We have just as good of a shot at moving higher as we do lower, if we're talking about the S&P 500 anyway. For those of you who follow all the index charts, you'll already know the NASDAQ Composite fared much better than the S&P 500 did today, working a little further beyond its 20-day moving average line. Now, while that's bullish on the surface, I do find it a little suspicious the Composite was halted at 4487, where it's peaked a couple of other times since early July. Things looked pretty bullish those first two times 4487 was approached too, and traders got the rug pulled out from underneath them. Maybe the third time will be the charm. What really concerns me about the NASDAQ's chart, however, is the VXN has dropped a screaming hint of a reversal from a downtrend into an uptrend. That's bearish for stocks. It all hangs in the balance, and to make matters messier, fighting got a little troubling in Ukraine today. Maybe it will start a chain reaction, or maybe it will cool off before it gets out of control. We just don't know. We are sure of this much though - we're glad it's the weekend and we don't have to think about it for a couple of days. Have a good one. We'll be back in the saddle on Monday.