If you blinked you might have missed it. But gold has fallen more than 13 per cent in only 3 weeks. In fact, during the week that ended September 23rd, gold saw its biggest decline in decades.
Despite this jewellery buyers are still willing to pay top dollar for your broken gold trinkets.
Do they know something we don’t?
On September 6th gold was flirting with $2000 an ounce closing at a record breaking $1921. Investors were calling it a flight to safety and economists were predicting gold would continue to rally if the debt problems in the world persisted.
Well, not a whole lot has changed in three weeks; the world is still at the door of a second recession and Greece is still on the brink of default. And several meetings later, efforts by the leaders of the worlds most powerful countries, have been futile in calming the markets.
As recent as this week, the three heavy weights in Canada, Finance Minister Jim Flaherty, Bank of Canada Mark Carney and Prime Minister Stephen Harper, met to discuss Canada’s future after a Greek default. The meeting revealed no concrete direction for our economy.
Meanwhile, Gold has fallen to almost $1650 an ounce.
Its dramatic decline has most wondering what investors are thinking. Usually when the world is in turmoil gold is considered the safe haven. It’s a place to park your investments while the financial markets settle down.
Recently Fed Chairman Ben Bernanke announced “Operation Twist”, a method he said would keep borrowing rates low for the long term and help stimulate the economy. Rather than calming the markets it sent stocks and commodities lower. Including gold, indicating traders have no confidence in Bernanke’s plans.
I have to admit, I was amazed by how fast the price of gold fell, and it sends a clear signal that the future is more uncertain than we first thought. Even the worlds biggest economies like, China and the U.S. are showing signs of slowing down. And that is sending investors mixed signals.
But in my opinion, the sell off in gold is temporary. There are a number of factors in the next few months that could send the precious metal higher. Number one is the Indian wedding season; gold traditionally rallies at this time as people from this part of the world buy the precious metal for jewellery and ornaments for the big day. Second the financial markets sent gold to a record high in a relatively short period of time and this could be a natural correction.
Experts are still saying gold will climb to above $2,000 an ounce by year-end. As recent as this month 16 respondents agreed in a Bloomberg survey conducted at a London Bullion Market Association conference in Montreal.
As interest rates remain at near record lows investors could still see the shine in gold and a place to actually make some real gains on investments.
Just look at all the tacky commercials on the television, begging to buy your broken jewellery. It’s an obvious sign that gold is still a hot commodity.