Sharp falls in the gold price have prompted some bears or pessimists to predict it will plunge below $1,000 (£625) an ounce.
Even specialist dealers, such as GoldCore, talked of “blood in the gold and silver trading pits as leveraged longs got their heads handed to them on a plate”.
Goldcore priced bullion at $1,721 or £1,079 per ounce this morning, compared to yesterday’s fix of $1,788 or £1,121 per ounce. A spokesman said: “The massacre is attributed to a host of different reasons – from month end book squaring to Bernanke’s suggestion that ultra loose monetary policies may soon come to an end.
“None of these reasons would justify the scale of the massive sell offs seen in gold and silver yesterday. Gold and silver markets saw massive sell orders from large institutional sources – as only large institutions selling could have caused a price falls of the magnitude seen yesterday.”
Brian Dennehy of independent financial advisers (IFAs) Dennehy Wellercommented: “Yet again the ‘safe haven’ myth of gold has exploded. It went down during intraday trading by about $100.
“This doesn’t mean the bull market has ended. It just means that when you buy gold you must do so with your eyes open – it is a highly volatile fringe asset.
“Our technical analysis suggests one of two possibilities. That the bull run is over and the price will eventually work its way down into the $700 to $1,000 range – or one final high lies just ahead before that large correction towards $1,000 will begin.”
Perhaps unsurprisingly, Adrian Ash of BullionVault took a different view: “The uptrend starting at Lehmans’ collapse remains unbroken, monetary policy remains abject worldwide, and the debt crisis remains unfixed and unaddressed.
“Extricating yourself from credit risk with physical bullion of course exposes you to price risk. That risk is growing more volatile the longer we spend behind the looking glass of sub-zero real rates.”
Perhaps at this point I ought to declare an interest, lest anyone accuse your humble correspondent of attempting to manipulate the global gold price; I hold some BlackRock Gold & General in my self invested personal pension.
More importantly, some IFAs support Mr Ash’s view that recent turbulence will prove no more than a short-term blip. Ben Yearsley at Hargreaves Lansdown said: “I don’t think the position on gold shares has really changed.
“The gold price has remained high and gold shares haven’t really moved therefore the disconnect between their profits and share prices remains. The world is still in an uncertain place therefore the demand for gold will remain strong, therefore underpinning the gold price and underpinning gold miners profits. So the outlook for gold shares remains good.”
Similarly, Alan Steel of Alan Steel Asset Management, said: “We may have the odd correction in price but gold is on a long haul secular bull market – in other words, the main direction is up.
“However, the crowd gets extremely pessimistic or optimistic from time to time. So we should see a short shallow fall in price which I’d view as a buying opportunity.
“We are not out of the woods yet on government debt in the West. Or, as we say up here in Scotland, governments are on a shoogly peg . As long as that’s the case and interest rates remain low, there’s a strong case for holding a portion of gold – in an exchange traded fund, unit trust or whatever – as an insurance policy. I certainly do.”
So, barbaric relic whose bull run is nearing its end or a long-term store of value that governments cannot devalue? Amid all the excitement of opposing views, it is worth remembering that despite recent setbacks, the gold price remains more than 9pc higher than it started the year.
We remain resolutely bullish despite what the bears claim.
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