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« White Knights for Greece | Main | Help! I’ve Been Taxed and I Can’t Get Up »
Wednesday
Mar242010

Gold Prices Drop Today

Gold Price Change 25 March 2010.JPG
The Kitco Gold Index


US Dollar Chart 25 March 2010.JPG

Gold prices dropped today by around around $15.00/oz as the above chart shows and as we can see the main driver behind the fall was not the actual selling of gold but the appreciation of the dollar. As we have long said gold prices are to a large extent an inverse play against the fortunes of the US Dollar.

The dollar would appear to have risen on the back of further depreciation of the Euro, which is being hampered by the uncertain outcome of the Greek situation in terms of their sovereign debt, a large part of which is about to be rolled over during April and May. The problem is that those who carry this debt will want a correspondingly high rate of return in order to shoulder the risk involved, which Greece can ill afford.

Will the European Union act as a union or will Germany hold out and refuse to allocate German funds to their European partners. There is always the danger that if they do cough up, then it could be become contagious and open the flood gates for the other debt laden members of the union to come banging on the door for a similar type of financial support.

In the short term the battle for the $1100/oz barrier will continue and may take some time to resolve, however, over the longer term we are firmly in the camp of the gold bull. The perpetual printing of paper money will indeed be its own downfall and gold will go on to rule supreme.

This shake out will make many investors nervous and some will sell their holdings. This has been the situation all the way up from the $260/oz level, a run up, a sell off, consolidation, and guess what? Another run up.

Usually at this time of the year gold prices hold up fairly well through March, April and May, yes its a big generalization and is not cast in concrete so it could well be different this time. For now we are sticking with our core positions as they are holdings for the long term, however, you may wish to lighten up, its entirely your call, we can only tell you what we are doing with our money and as you know we do get it wrong from time to time.

At this time we also need to keep an eye on the broader markets as a sell off is still a possibility which begs the question of whether our trusty miners are tied to gold prices or are they tied to the stock market?

Got a comment then please add it to this article, all opinions are welcome and appreciated.


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Reader Comments (8)

...And a nice bounce after your dispatch, just a lot of theatrics that indeed irritate but the path to golden skies is already preordained, no selling here but rather another buying op looms maybe....I get bit by a snake from time to time but that's part of the game...Snakeman Scott

March 25, 2010 | Unregistered CommenterSnakeman

I have followed the precious metals for over ten years. In that time gold stocks have always weakened in the summer months. I am willing to be corrected on that statement should a reader so wish. Precious metals are still way off their 2007 highs and have not kept up with the price of the commodity. ETFS may be the reason for this but elliot wave analysis of the long termm indicates gold will not make new highs until next Spring ( the end of seasonality)unless there is a major market upset. Precious metal stocks will crash again if the overall market corrects again

March 25, 2010 | Unregistered Commentergold bug

we started with Dubai, followed with Greece and people keeps saying "it is not dollar strength, it is euro weakness". I want to see what these guys will be saying when Europe announces its disintegration, dozens of other countries will default on its debt and dollar reach 115 on the index being the only asset that gained during this new crisis wave.

March 25, 2010 | Unregistered CommenterDi

Except when the US defaults on its debt, not if but when, then the golden fireworks start making the first 10 years of this bull run a preamble to the big dance.

March 25, 2010 | Unregistered CommenterSnakeman

The other day Jim Rogers was saying that it would be better to eject Greece as that would show that the EU means business and then the Euro would strengthen, he said that it would be good for all concerned.

However, where would it stop, there appears to be 5-6 countries in the same sort of mess that Greece is in, so maybe they think that there is safety in numbers or something!

March 25, 2010 | Unregistered CommenterGold Prices

I exited gold stock and options a couple of weeks ago. I had been trading the AEM MAY 55/60 vertical. They are now down again. I would normally have bought back in by now. However, it is looking like I want to wait and see how much weakness we have in the metals market.

By the time the weakness starts to end, I may well be looking at a lower vertical and AUG or NOV options.... We shall see.

So far AEM continues to look like the high quality stock to base the options on. I have started to look at NG as a future AEM.

I will be looking for your thoughts as to when to get back in.

March 25, 2010 | Unregistered CommenterBC

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