(click and click again to enlarge)
This week has seen gold plunge as the above chart shows gold’s $200/oz decline from $925/oz only a short while ago to trade at $725/oz as we write. Margin calls, de-leveraging and the general flight to cash continues at some speed. On top of this we have a number of countries reducing their interest rates with the effect of reducing the value of their particular currency, which in turn adds to the strengthening of the US Dollar, which now stands at 85.62.
Back to the chart where we can see that gold has fallen and then bounced off the $750/0z level only to fall again. We had hoped that gold would form a double bottom at this point but unfortunately it went straight through it to close at $728.85. We now need to see a reversal next week in gold’s performance.
It is difficult to understand why gold isn’t performing as it should so we cast around to see what others were saying:
On BNN yesterday John Embrey chief investment strategist, Sprott Asset Management: He pointed out just how difficult it is to obtain physical gold and eluded to the possibility of the Comex being unable to deliver on its obligations as early as the December contracts. Click here if you want to watch the interview in full.
The Motley Fool: They had this to say about Yamana:
But even with Yamana's shares far from their 52-week highs, the company carries a next-to-nothing long-term debt-to-equity ratio. And many CAPS members like Yamana's rich reserves in its existing mines, and see solid long-term potential in its low-cost structure and growth plans. As such, 97% of the 3,152 CAPS members rating Yamana Gold expect it to be a market-beating stock.
James West on Kitco.com:
Ignore the negative press on gold, and recognize the current price weakness for what it is: the last time you’ll see gold this cheap in a long time, and therefore a huge opportunity.
Jim Sinclair said this which re-enforces the importance of gold in current times:
Gold is the only viable insurance. Clearly equities (with the exception of precious metals shares) are not.
Gold is the only viable insurance. US Treasury bills are not because the yelling at all the rating agencies in Washington today just might get US credit downgraded.
General commodities have been viable, but by nature they are too wild and from now on will be selective until Pakistan implodes and Weimar appears
Banks cannot offer insurance as they are in the main bankrupt.
Insurance companies cannot offer you sound insurance.
Money market funds are not insurance, making gold the only viable insurance.
Retirement programs are no longer insurance.
Jobs are no longer insurance as companies are run by lawyers and accountants.
Equity in your home is not insurance because it simply does not exist.
Your family is no longer insurance because they have the same problems you do.
The assumption your kids will take care of you in your old age is not viable insurance no matter what you think.
Gold has no liability attached to it and is therefore the only viable insurance.
Gold is universally exchangeable, making it the only viable insurance.
Gold has historically performed perfectly in maintaining buying power, making it the only viable insurance.
Gold is the only viable insurance because it is Honest Money.
Since gold is the only viable insurance and because everyone needs it, gold will trade at levels of at least $1200 and $1650.
The unwinding of positions especially those on margin appear to be the key to this current situation. The longer this de-leveraging goes on the more the markets will fall. Is it a buying opportunity? Well we would prefer to see to some signs of a bottom before making any further investments but don’t let us put you off, we have been wrong before.
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