What’s going on with the price of gold? It would be nice if gold always went up in a crisis but short term it can get just as burnt as everything else. [It begs the question, however,] if gold is the great anti-asset, the thing to hold when everything else is in collapse, why is it now trading…[below $1,700 and] not $2,000? What is next for gold? Words: 765
So asks Merryn Somerset Webb (www.moneyweek.com) in edited excerpts from her original article*.
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
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Webb goes on to explain, in part:[There are] all sorts of reasons…[why gold is trading so low]:
- Panic begins [and] traders deleverage in a flight to liquidity (cash and the US dollar in particular) and everything gets hammered in the process. In 2008 this effect on gold (it fell 30%) was pretty temporary.
- When traders get margin calls (i.e. they have to stump up extra cash as collateral for some of their trading positions), they tend to raise the cash by selling profitable positions rather than non-profitable ones (who wants to book a loss?). Gold has had an amazing run so far this year so it makes sense for panicking people to take their profits on it in a hurry.
- Then there are exchange traded funds (ETFs). The sudden market understanding of the risks the global economy faces means that all the industrial metals have fallen fast (platinum, palladium, copper etc). These metals are often traded in packages or indices along with gold. So when they are sold the gold price falls along with them.
I am still a happy holder of gold…The only thing that could really mean that it was all over for gold would be a long period of deflation in the west and, while I’m sympathetic to the arguments for that, I am not convinced of them. Bernanke…[has not] turned the printing presses on [yet again]…but I bet he still has them primed and ready to go. The same goes for the Bank of England and the ECB.
The price of gold is a function of the market’s trust in central banks to protect the value of currencies…and…that has [not yet] changed…
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Over the past few years, pretty much every investor has become familiar with gold. The shiny precious metal has surged in price and has managed to hold strong while broad indexes have slipped, highlighting its appeal as a diversification agent and safe haven investment. This has prompted many investors to ramp up their allocations to the space in order to take advantage of these favorable trends and lead their portfolios to broad gains…[but] there are a number of other issues that investors need to be aware of when considering allocating capital to the space, as there are several reasons to avoid the precious metal from an investment perspective. Below, we highlight seven reasons for why investors may want to temper their expectations for the metal and consider a more diversified approach that doesn’t include such a large allocation to the ‘barbaric relic’. Words: 2030
We are at an important crossroads in this commodities bull market,,,[where] even the most fearless bulls are tempted to give up – to sell out of their positions and consider themselves lucky that they were able to be along for the ride and to escape with any profits at all – but I have posted a chart below to help remind you of the real danger in “getting out” now. Words: 350
If there is one thing we’ve learned about gold in recent years – and recent days – it is this: gold is not a haven investment… There are many theories about gold’s correction. [Let’s take a look.] Words: 781
When you just consider the downgrade of U.S. debt, the jobs problem, the housing situation, the European bank concerns and their debt crisis, the negative outlook for the global economy, not to mention that the Fed will likely seek new measures to help the economy, we just don’t see gold coming down any time soon, other than having a normal downward correction [as currently is the case. Let us show you why.] Words: 1102
Is physical gold the best available ‘safe-haven’ or is it the U.S. dollar – or perhaps even U.S. Treasuries? Words: 793
Gold is in the second phase of a Bump-and-Run Reversal Top pattern, which typically occurs when excessive speculation drives prices up steeply, and is now at a critical juncture where substantially lower prices could be realized. Let me explain. Words: 339
We are in an environment where gold bugs boldly proclaim that gold is going to the moon, and gold bears strongly protest that gold is in a bubble. At such a heated stage, this article attempts to answer the question, “What is a prudent investor to do now?” Words: 575