Skip to comments.Gold: Sell first — and then ask questions. No apparent fundamental reason for gold’s drop
Posted on 03/16/2011 10:38:26 AM PDT by SeekAndFind
Sell first, ask questions later.
That appears to be what gold traders did earlier this week, when their actions caused bullion to suffer a huge decline falling more than $30 alone on Tuesday.
Consider whether or not there are good fundamental reasons for gold to have fallen so much.
The default explanation, of course, is that bullions decline somehow traces back to the Japanese earthquake and the ensuing crisis.
But Im not so sure why.
Consider what is perhaps the most-invoked rationale for investing in gold: Its ability to hedge against worsening inflation. Isnt that rationale even more compelling now than it was before the Japanese earthquake hit last week?
For example, the crisis undoubtedly will lead the Japanese government into spending a lot more money in coming years than previously planned both in rebuilding the earthquake-ravaged regions, as well as in maintaining the value of the yen in foreign-exchange markets.
In addition, most analysts now seem to agree, the Japanese crisis makes it all but certain that the Federal Reserve in the U.S. will inaugurate yet another round of quantitative easing QE3 following the termination of QE2 this coming June 30.
Other things being equal, this should lead to more inflation, not less.
Another oft-cited rationale for investing in gold: Its a hedge against geopolitical uncertainty. But arent the horrors were witnessing in Japan a textbook illustration of just that kind of uncertainty?
Indeed, Reuters has reported, premiums for gold bars in Tokyo jumped earlier this week to $1 per ounce, up from zero last week and a discount in the weeks prior to that. That's just what we would expect, given the desire to hedge against uncertainty and suggests that its not reduced Japanese demand that is the culprit in golds recent plunge.
(Excerpt) Read more at marketwatch.com ...
There is no fundamental reason for gold to be so high, so it should be no surprise for a no reason fall.
I don’t cringe like I used to..
In five or ten years, we're going to look back and see that Fukushima Daiichi was the turning point for nuclear power. When it becomes obvious that a multiple LOCA in one of the most populated nations on Earth was just another industrial accident, and as gasoline goes past $15/gallon, people are going to start to demand nuclear energy.
The market makes fools of most so a few can make a fortune...
Yep. Agree completely.
Speculators can take prices up. And they can take them down.
Uranium stocks went through the floor....
“In five or ten years, we’re going to look back and see that Fukushima Daiichi was the turning point for nuclear power. When it becomes obvious that a multiple LOCA in one of the most populated nations on Earth was just another industrial accident, and as gasoline goes past $15/gallon, people are going to start to demand nuclear energy”
And by then, it will take *15* years (instead of only 10) to build them with the hundreds of new regs and tightened specs that the libs will demand. And there will still be 42% of the population that will resist nukes under any conditions.
Except, perhaps, the Obama administration printing money in order to fund the massive debt, even before one of the leading holders of American debt had a disaster that will cause them to stop buying U.S. debt and start re-patriating it's money.
“The market makes fools of most so a few can make a fortune...”
How kind of the market to do that for them.
It is called Deflation and it has been what the Fed fears most...because they can’t control it...
The dollar still has safe haven status, and strengthened when the scale of the disaster became clear.
So everything priced in dollars went down (Uranium and Japanese stocks of course being a special case).
This not so hard.
if the silver:gold ratio gets over 50:1 again, i’ll be swapping gold for silver.
then when it comes back under 30:1, i’ll be trading my silver for gold.
as of right now, gold ($1391.90), silver ($33.94) and the silver:gold ratio is 41:1
Sounds like a buying opportunity, buy into weakness, sell into strength. (buy low, sell high)
gold isn’t high. Money is just cheap.
I heard an “expert” on TV (Fox Business) mention that the Japanese might be selling gold to free up cash to pay for the tsunami/nuke plant disaster . . .
Gold was overpriced before Obama ever became President.
Insurance companies selling to get liquidity for pay outs.
Everything else fell, too. Why should gold, a commodity, be any different?
Does anyone know if the Bank of Japan is selling gold to pay for their disaster?
WOW!You seem to have this gold thing really figured out. What is the correct price that gold should be???
You would definitely need Steely nerves to jump on that play.
The correct price is that of the last transaction.
Oh obsolete. On to the next correct price.
buy into weakness,
I have one word - GM. Enough said.
A fool follows aphorisms.
Considering it is not scarce and is reusable the true value is probably around $300 an ounce.
That is what I thought, but it seems Patrick1 has a different take on what the real, true price of gold should be. That is the number I was looking for.
I will be happy to pay you $100 over the “true value” of $300.00 for as many ounces you care to sell me!!
Just wait a few more months.
Ah, you want to know what WILL the correct price be.
Send me your SS and bank account numbers and I will tell you.
Tell you what, as Free Republic is my witness, I will pay you TWICE your fair value of $300.00 per ounce for every ounce you wish in a few (3) more months. DEAL??
“Ah, you want to know what WILL the correct price be”
I know what the correct price will be. It will be the price that the market pays. The price a willing buyer is paying a willing seller.
You're entitled to your opinion, but gold was trading for about $750 oz at the beginning of November, 2008 - so it has nearly doubled in price since the election of BO.
Institutional investors are having a collective forced fire sale in order to generate the cash for anticipated insurance payouts in Japan.
Right now gold is up over $4.00.
Any fool that doesn’t understand accumulation - markup/markdown - distribution deserves to get fleeced in the market.