Gold’s Price Plunge
Gold finally succumbed to the collapsing commodity sector on Monday when at one point Gold was down over 4% in overnight trading. According to an article in Bloomberg, commodity prices hit the lowest level since 2002 on Monday. (Source: Bloomberg 2015 July 20th)
It says a lot about the global economy when prices of oil, iron ore, copper, platinum, palladium, are all plunging. As we mentioned in our last update, once the $1,130 technical level was breached, Gold was susceptible to a dramatic fall, which ultimately happened.
The next key areas of support first come in at around $1,150, then stronger support at the all important physiological support level of $1,000. One of the positives that Gold investors should be encouraged about is the ultra-bearish sentiment levels right now. It is difficult to find many analysts who are positive about Gold.
Sometimes an asset class has to go through a wash out phase to shake out the weak hands in the market. This is what is likely taking place in the Gold market. So over the short term Gold will find a bottom.
One of the things that we would like to highlight is how most mainstream financial analysts are clueless when it comes to forecasting prices. On August 22, 2011, one day before Gold’s all time high, Reuters released an article titled “Banks race to raise gold price forecasts”. In the article, all large financial institutions unanimously increased their gold price forecasts. It was the day before Gold peaked. (Source: GoldSilverWorlds 2015 July 20th)
Most analysts from the major firms do not have a good track record forecasting asset prices. No one really knows where Gold will find a bottom. However, the one thing for Gold investors to rely on is the yellow metals 2,000 plus year track record as a store of value. In a world of fiat money and unstable banks Gold is an asset that can be relied on over the long term.
According to an article on ZeroHedge, just before the Chinese market opened on Monday, Gold flash crashed in milliseconds never before seen. The article reports that the Gold slam was so furious that it halted the market not once but twice. (Source: ZeroHedge 2015 July 20th)
It does seem odd that this is not the first time that massive selling has taken place in the Gold market which has resulted in a significant price decline in less than a second. Whether or not it was an orchestrated attack on Gold by the powers that be or a large fund that dumped their Gold position is not known. But as we mentioned in our update Gold is one of the few assets that is undervalued right now.
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