The 14% gold price fall over the last few days has stunned the market into a panicked selling frenzy! Gold wasn’t alone in its descent and in fact all commodities have lost considerable value. With less people trusting the banks after what happened in Cyprus and now Portugal people are now starting to ask what shall I do
The answer is straightforward but before we go down that road I want to make it clear how we got here:
It wasnt long ago that the vast majority of market participants
and analysts were predicting $2,500 an ounce for gold some even by the end of next year. These predictions were made in the face of weakening global economic circumstances. Europe is technically bankrupt and cant afford to repay monies borrowed. Cyprus has just set a dangerous precedent of helping themselves to peoples bank accounts in order to raise money. People are of the opinion that this could happen in Portugal and wider Europe and consequentially people are being turned off using banks. Confidence has dragged European stocks down and wealth is dissipating into thin air.
Have all of these problems disappeared I very much doubt it! In fact to the contrary its got even worse.
I forgot to mention that the hedge funds and larger institutions are now taking advantage of the 14% discount and buying back into the market. Cyprus never sold in the end nor did Portugal. Its now clear to see who benefited from the gold price fall!
The end result is that gold is now 14% cheaper than it was 10 days ago. This coupled with the fact that the worlds problems are still more a concern today than they ever were surely means that gold now represents a stronger buying opportunity.
The light at the end of the tunnel for gold and silver market bulls, as far away as it may now seem, is that blood in the street is usually a value-buying opportunity that occurs only a few times in a decade, if that much.
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.