As majority of us know Gold took a sharp drop, reason behind the cycle of events in a nutshell is the massive drop in shares, occurring after Friday’s initial gold share drop.
Second worrying fact is that the price of gold has not drooped this drastically for thirty years (February 1983). Chain of events has affected a variety of investors disregarding their financial security. Best example of this is Gold Tycoon Paul Robinson, who is estimated to have lost hundreds of millions of dollars as the price of “metals” was sky rocking downwards
The price drop has caused uncertainty in a variety of forms, due to the low cash holding nation Cyprus considering selling a small amount, or all of its Gold reserves in order to improve economic standing. Furthermore the low growth levels internationally, especially China. Slowing the rates of growth reduces the threat of inflation.
In my opinion I don’t believe investment into precious metals should be whipped out completely, but on the other hand new investors should hold out for a short time while Gold is in the bear market territory. What story does this paint for a good investment broker? INVEST!
Large commodity conglomerate Saxo Bank believe the market is now in liquidation mode as a people seek to reduce their exposure to the metal, but on the other hand they are still stating the commodity has a little more to fall prior to its increase. Therefore it’s best to buy now while these large companies are short selling their product, and potential to earn some economies of scale at the same time also.
Secondly the speed of the market recovery depends on what stimulus was chosen to activate by central banks via quantitative easing. Quantitative easing is the process of flooding money into the economy by lowering interest rates encouraging consumers to spend rather than save.
Managing director of the world gold council Marcus Grubb believes that this low period for the commodity is only temporary, and supporting his argument with the demand of physical gold in fast developing countries like India where it is linked to all levels of society and culture, Secondly central banks will remain net buyers as long as Gold holds any form of value.
Second credible individual to support this thesis is Adrian Ash (Head researcher ad Bullion Vault) believes that it’s unlikely that gold prices would plummet despite the Fed’s smoke signals on ending quantitative easing.