Gold prices in 2013
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Why Gold Prices Are Going Down
Gold investors are just not feeling the love, once again left to wonder why gold prices are going down.
The yellow metal dipped again Thursday, with gold for June delivery ending down $10 at $1,386.10 an ounce. It was the sixth consecutive trading day of declines and marked a four-week low for the metal.
With equity markets continuing to log record highs, and economic data showing some signs of improvement, safe haven gold looks nothing like its moniker.
Fueling gold's recent rout is not one thing; it's a combination of things.
Here's why gold prices are going down this week.
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Jim Rogers Exclusive: Once Gold Bottoms, We're Looking at "A Multi-Year Bull Market"
Gold soared 650% from August 1999 to August 2011.
But it's down 24% from the $1,885 peak and in recent days has whipsawed gold investors in a way they haven't experienced in 30 years.
The bear market has gold bugs reaching for the Dramamine. But we reached for the telephone instead and dialed Singapore - and legendary investment guru Jim Rogers.
Many of Wall Street's biggest investment banks are calling for additional blood-letting - meaning gold prices have a lot more room to fall. But in his usual contrarian manner, Rogers dismissed the consensus.
Indeed, the former hedge-fund manager and best-selling author believes this is a badly needed - even healthy - price correction.
And that will set the stage for a new bull market in gold - and a run to record prices that are sure to come in an era of cheap-money policies by the world's central banks, Rogers told Money Morning during an exclusive interview.
"Gold was setting us up for some kind of correction," Rogers said in a Sunday night telephone interview from his home. "Gold needed a correction - it still needs a correction - and I hope this is the proper correction which gold needs. Then gold - somewhere along the way - will make a bottom and we can all join in the bull market as [it] goes higher and higher."
And make no mistake: The shiny metal is going higher - much higher.
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Is Now the Time to Buy Gold and Silver?
Wondering if now's the time to buy gold and silver? Wonder no more. Let me explain.
As a collector of both precious metals, like many, I planned on loading up in the wake of recent price declines. But guess what? My usual dealers were out of gold and silver.
Thanks to the selloff, a buying frenzy for bullion has crashed websites, jammed phone lines and depleted inventory.
"Our website was overloaded for the first time ever Friday and Monday. Every phone line was lit up. We did seven times our normal volume," Jake Haugen, VP of sales for Texas-based Provident Metals, told Money Morning.
You see, with gold on track to log its fourth weekly decline and silver headed for the worst week in about 19 months, bargain hunting abounded.
Declines in gold and silver prices began last Thursday and accelerated Monday when gold plunged $140.40, or 9.4%, to $1,360.90 an ounce, marking its biggest one-day decline in 30 years. Since its 2011 high of nearly $1,900 an ounce, gold has tumbled 28%.
Silver slumped $2.97, or 11.3%, Monday to $23.36 an ounce, well off its 1980 record high of $49.45.
As recently as last year, investors like me were paying more than $1,700 per ounce for gold and $35 per ounce for silver.
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Why the "Smart Money" in Japan is Investing in Gold
Some Japanese investors were thrilled as gold prices swooned this week, because they got a chance at investing in gold at a bargain price.
Tokuriki Honten Co., the country's second-largest gold retailer, reported Tuesday that Japanese investors doubled their gold purchases this week from the week before.
And Reuters reported how 63-year-old Yujiro Yamashita traveled to Tokyo's Ginza district to buy gold for the first time in 20 years.
Why?
It's thanks to fears stemming from Japan's new monetary easing, known as "Abenomics."
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If You're Worried About Gold Prices, You Need to Read This
When stocks fall by 20% or more from their peak, it's labeled as a "bear market."
With gold prices down 26% from their record close back in August 2011, the "yellow metal" has entered a bear market of its own.
It took an especially ugly day on Monday to get us to that point.
Two days ago, gold prices plunged as much as 9.7% - the biggest decline since 1980 - and continued a sell-off that saw the yellow metal fall by 4.7% last week, including a 4.1% drop on Friday.
The metal has now fallen 26% from its Aug. 22, 2011 settlement record of $1,888.70.
To get some expert insights on this sell-off, I telephoned Peter Krauth, our resident natural resources expert and editor of our Real Asset Returns research service. Peter based himself in Canada to be closer to the miners and natural-resources companies he covers for his subscribers.
I asked Peter for insights on the following three questions:
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Every Gold Coin Has Two Sides
Just as every coin has two sides, every data point that doesn't meet expectations usually has an upside somewhere.
For instance, although gold prices have fallen with the strengthening U.S. dollar, the yellow metal is appreciating in Japanese yen. So when negative news about the economy came out this week, along with the U.S. Labor Department reporting that the country added only 88,000 jobs in March, investors found reasons to be encouraged.
For one, the Federal Reserve is apt to maintain its stimulative easing course and keep interest rates low.
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This Gold Prices Chart Points to a Looming 24% Jump
Despite a pullback in gold prices, hold on to your gold. In fact, look to buy more.
You see, thanks to record highs for the U.S. stock market, a notable shift from defensive assets to "risk-on" trades has occurred.
The yellow metal slumped 1.4% to $1,552.80 Wednesday marking a nine-month low. That's after gold prices slid below $1,600 an ounce in Q1 on hints of a global economic rebound. The slide prompted market participants to shed gold holdings.
It's "certainly understandable" for investors to have sold gold following a 400% appreciation over the last decade and move into stocks, said Malcolm Burne, chairman of the Golden Prospect Precious Metals investment trust.
But, here's why the tide may be about to turn.
