Gold has plunged more than 20% and is off nearly 30% from its 52-week high. A buying opportunity? Hardly. I’m…looking for another down leg in the range of $1,000 to $900 an ounce. That’s another 20% to 25% loss. [Here’s why.]
So writes Adam Fischbaum (www.streetauthority.com) in edited excerpts from his original article* entitled Think It’s Time To Get Back Into Gold? Think Again.
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Fischbaum goes on to say in further edited (and in some instances paraphrased) excerpts:
The End Of The World Has Been Postponed
When it comes to investing, fear is often a primary driver. Most individual gold investors are driven by fear. [While] most institutional gold investors use it purely as exposure to an asset class the man on the street buying shares of GLD or South African Krugerrands is frightened of:
- runaway inflation,
- currency devaluation,
- government overreach and
- societal collapse.
It’s always good to think about survival, but it’s a terrible investing theme. Domestically, things are improving.
- The unemployment rate is shrinking slowly. It currently sits at 7.6%, down from 10% at the deepest part of the crisis recession. It isn’t great…but it’s a considerable improvement. One positive consequence: The slower that businesses are to hire new workers, the slower the money will flow. Inflation will remain tame.
- The dollar is stronger than the panicky masses think. The U.S. Dollar Index (DXY), which measures the strength of the dollar versus other benchmark currencies, is up nearly 14% since 2011, despite the Federal Reserve’s QE.
Goldbugs believe the shiny yellow metal serves as a proxy currency to replace weak fiat money. If market forces dictate the rise of gold prices as the dollar falls, then the inverse — gold prices falling as the dollar rises — is inevitable.
The Fed has also hinted that it may begin slowing down or “tapering” its bond purchases. This indicates an eventual end to QE and the debased currency. If you think gold prices have a downward bias now, wait till tapering really begins!…
Think about the classic goldbug argument: invest in gold as an inflation hedge. I just can’t see the logic in this outside of protecting a portion of your wealth. The simple explanation of inflation is that it takes more money to buy less….[While] any major events in the Persian Gulf, Europe or the Korean Peninsula could send gold soaring on the fear trade, global economies could erupt into chaos, and QE could go on forever, is always a possibility, realistically, the chances are probably slim. U.S. GDP growth, while not stellar, has improved dramatically, surging from negative 8.9% during the 2009 recession to a positive 1.8% currently.
As the U.S. economy continues to improve steadily, the Federal Reserve prepares to dial back its QE policy, and investors continue to rotate into stocks, the price of gold is poised to fall further. Look for another down leg in the range of $1,000 to $900 an ounce. That’s another 20% to 25% loss.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.streetauthority.com/energy-commodities/think-its-time-get-back-gold-think-again-476152 (Copyright 2001 – 2013. StreetAuthority, LLC All Rights Reserved.)
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