“When people get scared, I get greedy….” – Warren Buffet
Gold: Big Decline Equals Big Opportunity!
Spot gold is down $27.50 at $1,608 having lost $58.8 or 3.4 percent this week. Gold has fallen to its lowest since August 22 at $1,625.70. Why? Among other reasons:
- George Soros and others have decreased their positions in precious metals.
- The World Gold Council (see our listing here) shows Chinese gold demand was flat in the final quarter of 2012 and Indian buying is down due to increased import taxes.
- EU fourth quarter GDP fell by 0.6% confirming the Euro zone is back in a recession. This caused a rally in the US Dollar and sets up Dollar gains in the short and medium term.
“Gold… continues to trend lower and has breached the $1,635 support level,” said analyst William Adams of Fast Markets. “The metal has a long-term support line at $1,618 per ounce but the stochastic’s are trending lower so there is room for further weakness.”
Conversely, rival fund manager John Paulson is maintaining his holdings and Peter Schiff is still calling for gold to climb to $5,000 an ounce.
Gold may well recover when Asia trading returns to the market on Monday following this week’s Chinese New Year. Gold’s move lower may be overzealous as Chinese physical demand may well return at these lower levels.
Here’s what’s happening – people are becoming frozen, or even scared. Confidence is shaken. (Physical) selling may begin if gold heads to $1,550. ETF selling is already in full force. The downtrend feeds on itself. People are wondering where the bottom is.
Warren Buffet gives sage advice in times such as this. He said, “I get greedy when people get scared, and I get scared when people are greedy”.
All Things Considered – John’s Commentary:
I have seen this so many times before. Inevitably, after big drops such as this, people look back and say, “I wish I would have bought more. I blew it”. Such was the case in 2008 when silver dropped from $22 to $9 per ounce. Lot’s of people were buying at $22. No one was buying at $9. Don’t make that mistake here. These are bargain basement, fire sale prices.
IF you believe in physical gold and silver, close your eyes and pull the trigger.
