Gold plunged to 5 year lows when the gold price crashed through the $1,100 per ounce mark during Asian hours today, with the metal now trading at its lowest level since March, 2010. Scores of Chinese traders offloaded more than five tonnes of metal – pushing the price from around $1,130 all the way down to $1,085.
A lack of safe-haven interest and a dollar that is strengthening has put gold and silver in a bad light. All of that said, we, and other seasoned investors are buying on these five year lows. You would expect me to say this because I am in the bullion business right? But stop and think.
As you purpose as an investor to buy low and sell high, I encourage you to consider the following facts:
Technical selling pressure on the gold futures market is the key driver behind the price decline.
On a shorter-term technical basis, there are indications that the gold market has sold off enough recently to now warrant an upside technical correction.
The Commodity Futures Trading Commission’s Commitment of Traders report also signals that the metal may be ready to turn positive.
HSBC analysts expect bargain hunting to consistently pare losses.
The US mint has seen its busiest month since April 2013 in only the first few weeks of July. The data shows that the mint has sold a total of 101,000 ounces of gold this month. Last year the mint sold 30,000 ounces of gold for the entire month of July 2014.
With China wobbling, Europe in turmoil and the price of bullion down to multi-year lows, the long-running gold skeptics running the world’s biggest investment funds have suddenly and dramatically turned on to gold’s appeal.
American speculators’ short selling in gold and silver futures has reached extremes in recent weeks. This single group of traders commands a wildly-disproportionate impact on prices due to the absence of investors and outsized leverage inherent in futures trading. But extreme shorting is a very bullish indicator, as offsetting long futures contracts must soon be bought to cover these excessive shorts.
All Things Considered – John’s Commentary:
Gold bullion is now at its lowest level compared with the world’s stock markets since before the Lehman Brothers collapse. Since 2011, gold has fallen about 40% in U.S. dollar terms. Meanwhile, stocks and bonds have boomed to new highs.
Multiple articles indicate that Bank of America and Merrill Lynch money managers are now beginning to think that maybe they should sell a little of what’s gone up to buy a little of what’s gone down. Those that have always been bearish on gold are now beginning to buy.
Back to the old adage of buy low sell high.
