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Gold Bulls Running Scared on Price Collapse

Commodities / Gold & Silver Oct 23, 2008 - 10:28 AM GMT

By: Mark_OByrne

Commodities Comex gold's recent sharp selloff has continued and even the most ardent gold bulls are getting nervous. Bearish sentiment is very prominent and the level of fear in the precious metal markets suggests that a low is likely in the coming days. Leveraged players in the futures market are dumping paper positions wholesale while astute contrarians are using this as an opportunity to buy physical bullion at firesale prices.


Both Comex gold and silver are off another 2% and 1.6% today after their sharp falls yesterday when they fell as much as losses of 4.1% and 5.6% respectively. Losses on stock markets were even more brutal with falls of 5.7% and 6.1% on the Dow and S&P and more sharp falls in Asia and Europe today.

Wholesale panic selling in all markets on massive deleveraging is leading to gold (and silver) prices way below their fundamental value and smart money continues to accumulate gold and silver bullion on this most recent correction. While inflation risk has indeed abated and deflation is currently feared by the market, the hugely inflationary implications of the Federal Reserve and Treasury's injections of billions and billions of dollars into the international financial system will be realized in the coming months.

Gold and Silver Investments remain confident that gold and silver remain in bull markets and this is just another counter trend sell off (a very sharp one nevertheless). We believe that that once the election is over, we will see a sharp rally in gold as the dollar's recent strength and oil's recent sell off comes to an end.

Speculators will continue to be decimated by the current and likely to continue massive volatility  and market turmoil. Investors who continue to focus on real value and focus on the medium to long term will be richly rewarded in the coming months and years.

We always caution our clients that while gold is an essential asset in a properly diversified portfolio, it should only remain a component and deserves an allocation of some 10%. A 5% minimum allocation in a benign macroeconomic and systemic environment and maybe as much as 20% given the current unprecedented volatility and uncertainty.

Many of our clients do not care what happens to the gold price in the short term as they see it as financial insurance and not as a speculation or money making exercise. The old Wall Street adage to hold 10% of your portfolio in gold and hope it does not work remains more than valid.

Those who deny gold is a safe haven asset given the precarious state of the international financial and monetary system show a remarkable lack of understanding of financial and monetary history and of our modern financial and monetary system.

Paying lip service to diversification is a dangerous thing to do in these unprecedented financial and economic times.

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

thowze
23 Oct 08, 20:35
Buy the paper, sell the physical!

With the incredibly low prices on silver through COMEX, an arbitrage opportunity exists. Anyone who can afford it should take out a futures contract through COMEX for physical delivery which is currently at $9.66 USD on 10/24, so they can resell it at market prices which can be up to $18 to $20 an ounce. These physical prices are being obtained by coin shops, online retailers and Ebay. Get in on it quick before the difference between the two closes up!


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