Gold futures fell Wednesday for a fourth straight session to the lowest level in nearly one month.
Since hitting a new high above $1,226 an ounce on Dec. 3, gold has declined nearly $100, or 8%, in the four sessions.
Gold for December delivery declined $22.40, or 2%, to $1,120.40 an ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement since Nov. 13.
Until Bernanke starts serious money printing again, I expect the price to continue in a significant downtrend. $600 top $800 per ounce is not out of the question. Contrary to myth caused by FDR's propping up of gold during the Great Depression, the belief continues to hold that gold goes up during a financial crisis. In general it does not, it goes up when central banks print money, something the Fed has not been doing since February.
Of course, this does not mean you should sell your core holdings. But if you are trading gold, you should trade it from the short side.
Wenzel,
ReplyDeleteGold is in a long-term bullish trend against most paper currencies. Is that because they're all printing or because gold performs well in a paper-currency crisis?
Will gold perform in the event of a default? Can we take QE measures in a given country to be a form of default?
Of couse the producers bought back their hedges at the top.
ReplyDeletehah - someone ought to post this link to ZeroHedge; it could start a flame war.
ReplyDeleteActually Gold rises when there is a negative real interest rate, as Bernanke does not seem intent on raising rates in the near future, I expect Gold to correct then reassert itself within it's secular trend.
ReplyDelete@Taylor Conant
ReplyDeleteGold is in a long-term bullish trend against most paper currencies. Is that because they're all printing or because gold performs well in a paper-currency crisis? I don't see much of a difference between countries printing and a paper currency crisis. Without them printing the odds of a paper currency crisis would be extremely slim.
It depends upon the nature of default. A knee jerk reaction up in gold is possible, but keep in mind the default is likely caused by a shortage of dollars, which mean there are also fewer dollars to buy gold.
@ Anonymous 9:11 PM
Who says we have a negative real interest rate now? I actually think real rates are below 1/4%.
When I think of a secular trend I think of a new long lasting demand for a product, gold is only in greater demand when central banks print money. The Fed is not now printing. Gold trends are cyclical not secular.