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Bloodbath in the precious metals markets

C

Charles Kozierok

Elite Member
As I write this, gold is down $125 an ounce today, about 8.5%, and silver down $2.67 or about 10%, in panic selling. This follows fairly extensive losses last week.
 
I remember Peter Schiff predicting gold at $5,000 an ounce by right about now. (I'm pretty sure he later revised it to a couple years from now after it became obvious he was wrong the first time).

Gold is traditionally viewed as a hedge against currency inflation. While a selloff like this could be due to many different reasons, it hardly speaks to the market expecting lots of inflation in the near future.

I wonder if further market indications like this will cause people predicting major inflation to reconsider their views? (my guess? no.)
 
My broker recommended that I put 5% of my portfolio into a gold fund. That fund is way down, my poorest performing investment by far. Fortunately it's only 5%.
 
Is $1400 really that low? I guess if you bought at $1800, definitely.

I bought most of my gold in the 90s and early 2000s, so I don't see this as a crash, more like a small correction. And a pretty reasonable correction when you think about what's going on in Europe right now, and how well the stock market is doing here domestically. I'm not buying any more gold, but I'm not selling either.
 
jpeyton said:
Is $1400 really that low? I guess if you bought at $1800, definitely.

I bought most of my gold in the 90s and early 2000s, so I don't see this as a crash, more like a small correction. And a pretty reasonable correction when you think about what's going on in Europe right now, and how well the stock market is doing here domestically. I'm not buying any more gold, but I'm not selling either.
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Well the value of any investment comes from what the price was when you started. If you invested far enough back then you're absolutely right that you're still looking at a nice return. Regardless, gold has lost about a third of its value in a fairly short period of time and a lot of analysts are predicting further declines of up to around 20% from where it is now.
 
Stocks are very undervalued. It makes sense to get out of metals and into stocks. Gold/Silver aren't supposed to just rise indefinitely.
 
I would speculate that the "healthy" economy due to our ongoing stimulus efforts (Federal Reserve included) is credited with applying enough pressure to bust the gold market.

The fall could be quite severe, as the rise in price was huge. However, I still think our current economic conditions are in no better shape. I expect gold to return to form if the economy tanks, but I in no way know when that would happen.
 
A quick google indicates that the drop is a result of bad economic news from China. Stocks dropped sharply too.

Fern
 
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Fern said:
A quick indicates that the drop is a result of bad economic news from China. Stocks dropped sharply too.
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This is a bit confusing because stocks were still open after the Boston bombing, while I believe COMEX closes at 1:30 or something silly. This sort of thing would normally cause gold to go up and stocks down. The damage in gold is way too much to be a response to economic news out of China... and this started last week.

eskimospy said:
...a lot of analysts are predicting further declines of up to around 20% from where it is now.
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Probably the same ones who were predicting it would go up 20% when it was at $1600. I'm starting to think "analyst" is better viewed as a derivation of "anus" than "analysis". 🙂

Seriously, predicting markets is a fool's errand, and that goes double for precious metals. People who hold them for fundamentals reasons have not seen anything change. Those who were trading them, well, you play with fire...
 
Interesting that gold and stocks both got hammered today, and no the bombing wasn't to blame, as this was in play before that.

Gold has been on a high for way too long, held up by crack pots in great part.
 
Charles Kozierok said:
Seriously, predicting markets is a fool's errand, and that goes double for precious metals. People who hold them for fundamentals reasons have not seen anything change. Those who were trading them, well, you play with fire...
Click to expand...

A fool's errand? Well, gold did surge amid the financial crisis of the past five years. Sure, it was rising before then - but that really spiked the football. Could have made money if you bought in back then and sold, even now.
 
Wow, I haven't looked at precious metals in a long time but I remember that 15 years ago, gold was at ~$400/oz. Wish I had hung onto what I had bought at that time, but it really wasn't much (a few bars and a few ingots stashed in a box safe in my closet).

Incredible to see that it's quadrupled its value in that time.
 
My understanding is that whenever stocks aren't deemed safe or reliable, precious metals are going to rise as the default currency investors commonly agree to support. Isn't it totally fake, though? I guess it's only reasonable to expect it to go way down once other investments are safe again.
 
My worthless opinion as to the rise and fall of gold would be the economic outlook for China. Both China and India, as I understand it, only via hearsay, it is part of the cultures of these two countries that ordinary people use precious metals as a means of secure savings, wearing much of it. If either country is predicted to see hard times, demand for metals will go down, and economic prosperity there has fueled a lot of the growth we have seen in precious metals prices.
 
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