Posted on 06/30/2011 10:09:26 PM PDT by OneLoyalAmerican
Gold stumbles, but some gold bugs think the storm has passed. When I last wrote on gold, the metal was looking good—but I described gold shares as a “train wreck”, while noting that a number of observers were thinking the gold shares might have lagged too much.
In the past week, it is tempting to say the situation has reversed. Last Wednesday, gold closed at a seven-week high, and the Aden Report was talking of a possible move to $1,600 soon.
Then the roof fell in. By Monday, gold /quotes/zigman/700181 GC1Q -0.10% had fallen $58 (3.7%) to close at $1,496.40.
As a correspondent on the LeMetropoleCafe website pointed out, the drop in open interest (the number of gold contracts outstanding) was even steeper, over 5%. This is regarded as discouraging: It suggests real selling by contract owners was involved, rather than short selling, which carries with it the possibility of a short-covering rally.
In the past two days, gold has managed a modest recovery — $14 as of Wednesday’s close. But the Aden Report is now discouraged, saying this evening that gold (and silver) “are bouncing up this week as global tensions ease, but this may not last long. ... Note that both of the short-term indicators are declining, suggesting prices will likely soon head lower in a further downward correction.”
(Excerpt) Read more at marketwatch.com ...
The problem with this headline is that “the storm” is what has caused gold to essentially quadruple since 9/11.
The storm passing would see gold prices come back down to earth. It’s a safe haven investment in times of turmoil and uncertainty.
To believe otherwise is to eventually experience a big loss somewhere down the line.
Excellent contribution, my FReeper FRiend. Conditions are different today, but Barry 0bozo is attempting a Jimmy Carter redux.
In 1980, the prime lending rate was approaching 22%, democRats owned Congress and did what they always do: tax, regulate, and spend. This sent stocks into a tail spin. Given US private citizens could not own gold, silver was the only hedge for inflation.
The upward gold climb was also partially in response to the Soviet invasion of Afghanistan, the Iranian hostage situation, a tumbling stock market, and the Hunt brothers along with some wealthy Arabs attempting to corner the silver market. They had amassed about half the worlds deliverable supply: 200 million ounces of silver.
The downward spike in silver and gold was driven in part by COMEX changing metals trading rules and Federal Reserve intervention.
Cheers,
OLA
It reminds me of the NASDAQ climb to the sky in 1999.
Do ALL markets that rise inherently crash? Or do you have some insight to share?
Looks nothing like current charts.
The chart is from the 1980 spike and crash in gold prices. It was posted as an example.
Do ALL markets that rise inherently crash? Or do you have some insight to share?
IMO- the vast majority do. Down cycles are required to maintain a healthy market.
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