Gold (and Silver) Prices Plummet
The price of gold has plummeted over the last few days. Don't you just love the word "plummet"? It's a favorite of the media - a good scary word to get you all stressed out. I know it gets to me once in a while. Just it: "Plummet!" See, doesn't that stress you out?
Well the thing about the price of gold going down (there that's less stressful, isn't it?) is that it's really not that big a deal. Really. What makes me say that?
For now, I'll skip the fundamental analysis. If you've read my posts over time, you know that I believe gold is in a primary bull market - perhaps the greatest bull market of our lifetime. And, yes, that includes the great stock bull market of the '80s and '90s.
So besides the fundamentals, you can just remember that gold's price exploded over the last several weeks. And I mean exploded. The term we use is it "got ahead of itself." So it naturally has to correct.
But wait. How much will it correct? That I don't know. But if we just look at some technical indicators, they can help us get some perspective.
First, our old standby's, the 50-day and 200-day moving averages. The 50-day is at 1627.93. The 200-day is at 1477.16. As I'm writing, the spot price of gold is at 1715.80 - oops, down now to 1707. So we're not even below the 50-day moving average, never mind the 200-day.
Even more specific to gold is the 150-day moving average. I've been following the price of gold relative to its 150-day moving average and for the last couple of years, that's been solid support. It hasn't gone below that. The 150-day moving average is now 1508.34.
Of course, if you own gold and you've got a weak stomach, you'd better either stop looking at the price for a while, or brace yourself. The fact is, it wouldn't be at all outrageous to see the price drop to its 150-day moving average, given the price actions of these last couple of years. I'm not saying it will; I'm just pointing out that if it did, I wouldn't blink.
My final thought is to remember way back in January, when gold was in the upper 1400's. Given the fact that gold had gone up every year for ten years, I thought back then that I'd be happy if it just held its price even for the year. I thought that because I try to be realistic about things, and any item going up ten years in a row is, well, unheard of. (Even during the great stock bull market of the '80s and '90s there were not ten-year periods where stocks always went up every year.) So when a trusted source predicted a price of $1,650 for 2011, I just smiled and said, sure, that'd be great, but I'm not counting on it.
That's why when gold not only hit $1,650 but blew far, FAR past it - actually breaking $1,900 intraday - I figured the correction would be pretty steep. And sure enough it is.
(While I don't bet the ranch on such price targets, they're helpful to gauge how things are going, as in the case of gold this year.)
Bottom line, I'm ready for prices to sink at least to 1650, maybe much lower. At this point, I'm starting to thing we're finally getting to a point where if you don't own any gold, you could be thinking about buying some. And you could think even more about that if the price does indeed continue down.
As for silver, it's a similar story, except that if you think gold is behaving in a volatile manner, just know it's nothing compared to the volatility of silver. But that's a story for another time.
Well the thing about the price of gold going down (there that's less stressful, isn't it?) is that it's really not that big a deal. Really. What makes me say that?
For now, I'll skip the fundamental analysis. If you've read my posts over time, you know that I believe gold is in a primary bull market - perhaps the greatest bull market of our lifetime. And, yes, that includes the great stock bull market of the '80s and '90s.
So besides the fundamentals, you can just remember that gold's price exploded over the last several weeks. And I mean exploded. The term we use is it "got ahead of itself." So it naturally has to correct.
But wait. How much will it correct? That I don't know. But if we just look at some technical indicators, they can help us get some perspective.
First, our old standby's, the 50-day and 200-day moving averages. The 50-day is at 1627.93. The 200-day is at 1477.16. As I'm writing, the spot price of gold is at 1715.80 - oops, down now to 1707. So we're not even below the 50-day moving average, never mind the 200-day.
Even more specific to gold is the 150-day moving average. I've been following the price of gold relative to its 150-day moving average and for the last couple of years, that's been solid support. It hasn't gone below that. The 150-day moving average is now 1508.34.
Of course, if you own gold and you've got a weak stomach, you'd better either stop looking at the price for a while, or brace yourself. The fact is, it wouldn't be at all outrageous to see the price drop to its 150-day moving average, given the price actions of these last couple of years. I'm not saying it will; I'm just pointing out that if it did, I wouldn't blink.
My final thought is to remember way back in January, when gold was in the upper 1400's. Given the fact that gold had gone up every year for ten years, I thought back then that I'd be happy if it just held its price even for the year. I thought that because I try to be realistic about things, and any item going up ten years in a row is, well, unheard of. (Even during the great stock bull market of the '80s and '90s there were not ten-year periods where stocks always went up every year.) So when a trusted source predicted a price of $1,650 for 2011, I just smiled and said, sure, that'd be great, but I'm not counting on it.
That's why when gold not only hit $1,650 but blew far, FAR past it - actually breaking $1,900 intraday - I figured the correction would be pretty steep. And sure enough it is.
(While I don't bet the ranch on such price targets, they're helpful to gauge how things are going, as in the case of gold this year.)
Bottom line, I'm ready for prices to sink at least to 1650, maybe much lower. At this point, I'm starting to thing we're finally getting to a point where if you don't own any gold, you could be thinking about buying some. And you could think even more about that if the price does indeed continue down.
As for silver, it's a similar story, except that if you think gold is behaving in a volatile manner, just know it's nothing compared to the volatility of silver. But that's a story for another time.
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