price of gold
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.
Gold Prices Rise as Traders Cut Short Bets
Gold regained some of its luster Monday with June Comex gold ending up $30.50 at $1,425.80, and spot gold prices finishing up $19.80 at $1,426.75.
The gains came from short covering, bargain hunting, and strong demand for physical gold.
According to the Commodity Futures Trading Commission's Commitments of Traders report released April 19, managed money traders (i.e. hedge funds and commodity trading advisors) boosted bullish positions on gold by 21,675 contacts to 68,662 contracts, while paring bearish bets to 54,025.
The CFTC's summary of trading positions showed bullish investors returned to the gold market last Tuesday, when the data was compiled. The increased long positions came on the heels of gold's largest one-day sell off in 30 years.
The report showed managed money traders covered 12,411 shorts, as gold prices finally bounced last Tuesday.
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.
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.
Central Banks to Keep Investing in Gold – as Should You
Up until gold's recent plunge, there was a major story that had captured the attention of everyone investing in gold.
That story was the massive purchases over the past year or so of the precious metal by many of the world's central banks.
According to the World Gold Council, the world's central banks have been net purchasers of gold since the second quarter of 2009. Since the financial crisis central banks, particularly in emerging economies have sought to diversify away from the U.S. dollar to a safer long-term asset.
In 2012, central bank purchases hit a 48-year high. Central banks bought 534.6 metric tons of gold (about 15 million ounces) last year. This was 17% more than in 2011 and the most purchased since 1964. The biggest buyers were the BRIC countries of Russia and Brazil.
With the recent turmoil in the gold market, investors worried that these central banks would turn away from gold.
But according to Money Morning's Chief Investment Strategist Keith Fitz-Gerald, central bank buying will continue.
In fact, he believes that the amount of gold bought by central banks this year will easily double, led by central banks from the developing world.
The answer is a key factor on why to keep investing in gold in 2013.
What's Next for the Price of Gold?
Before investors even attempt to guess what's next for the price of gold, they first need to understand why gold prices have fallen so much.
While some have blamed Goldman Sachs Group Inc. (NYSE: GS) for manipulating gold markets, Money Morning Chief Investment Strategist Keith Fitz-Gerald explains that the Goldman "puppet masters" are only partly responsible for gold's slide.
In fact, Keith says Goldman simply set the market up for this fall and that another catalyst actually caused gold's selloff...
Keith also has an answer for the question we're all asking: What's next for the price of gold?
Why the "Smart Money" in Japan is Investing in Gold
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.
It's thanks to fears stemming from Japan's new monetary easing, known as "Abenomics."
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:
Investing in Gold: Here's What to Do Now
Gold prices tumbled $140.40, or 9.4%, to $1360.60 an ounce. This brought the two-day decline to $203.70, or 13%.
- The Federal Open Market Committee (FOMC) meeting minutes that came out last week suggested the central bank may start scaling back its monetary stimulus measures later this year, reducing inflationary pressures.
- Goldman Sachs Group Inc. (NYSE: GS) last week cut its 2013 average gold forecast, for the second time, to $1,545 from $1,610. Investors like to dump the metal after the release of bearish research.
- There have been rumors financially strapped Cyprus was selling 400 million euros of gold, 75% of its reserves to raise cash.
Gold prices ended the drastic two-day decline Tuesday, up nearly 2% to $1,387.40.
Keith Fitz-Gerald on What's Driving Down the Price of Gold
Investors want to know: What's driving down the price of gold - and how long will the plunge last?
Gold prices tumbled Monday by more than 9% - the biggest percentage drop in 30 years.
The yellow metal had fallen to just above $1,360 an ounce Monday afternoon.