Gold and silver prices set for correction in market sell-off
Posted on 27 February 2011 with 6 comments from readers
For some months now ArabianMoney has been reminding readers of recent history in the precious metals market, namely the price collapse in the 2008 global financial crisis. Far from being a safe haven precious metals fell, by more than 30 per cent for gold and silver dived over 50 per cent.
The next edition of the ArabianMoney newsletter takes a detailed look at what to expect this time around, with financial markets looking to be close to or even just past a critical inflection point – in other words on the way down again and not up (click here to sign-up for tomorrow’s edition). Last week the S&P 500 took its biggest plunge in three months.
Big recovery
Precious metals have come a long way in the past two weeks, and look vulnerable in any sell-off. Will 2011 be any different to 2008? Will it really be different this time? That is the dilemma for investors and the most likely explanation for why precious metals appear to have stalled around current prices.
Some commentators are surprised that gold and silver did not sell off more in January or last week. They would have seen this as a buying opportunity. But perhaps the next big dip is just around the corner.
That said ArabianMoney remains confident of very much higher gold and silver prices over the next year or two, with peaks of $5,000 and $400. Keep up-to-date with our very reasonably priced newsletter that may be the key to your future fortune and offers the actionable advice we cannot print here.
6 Comments posted by readers:
Here is an article that many Silver fans here may like.
http://www.commodityonline.com/news/China-Silver-imports-hit-record-3500-tons-in-2010-36266-3-1.html
Ed Note: Interesting but a sudden collapse of Chinese demand is also an Achille’s heel…
how much ‘baby’ is thrown out with the bathwater in next crash will tell us the state of how far people have grown to look at gold/silv as money.
i do not think they are there yet…..i will be a big buyer…..miners will fall the most.
When stock markets enter a correction period, most stocks go down; when they are in rout, all stocks will go down. In a similar way, when the tide goes out, it lowers all boats.
Other aspects to consider are the margin calls and the deleveraging by overly leveraged banks, hedge funds, etc. And when these boys have to deleverage, they are forced to raise money by selling off their valuable assets, such as precious metals (PM).
But there’s another factor that we must consider, as it relates to the volatility of PM prices, and that is the “engineered corrections”. This is what happened to silver in 2008, when the commercial silver shorts drove the silver price into the ground, in order to profit from the extensive volatility.
If these commercial shorts (e.g. JPM, HSBC, BofA, GS, et al) have the intestinal fortitude to do a “repeat performance” this time around, the world will quickly gobble up all available gold and silver, thereby driving the price back up.
You think silver went down, check out the 5 year chart for rhodium on the right side of the first page at http://www.kitco.com. Will it ever go back to $10,000 an ounce? I must confess, until I visited the Kitco site, I never heard of the stuff. Then again, I never had to plate any rocket nozzles so they wouldn’t melt before the fuel was exhausted up in space. I never heard of niobium either. Thank goodness for Wikipedia.
You can short gold and silver for dollars; then what do you do with the dollars? The dollar does not appear as a viable alternative right now.
@ Bill in Slidell, or Near Slidell:
Kitco is one of several great sites to monitor the spot prices of metals; I enjoy viewing the “propaganda” prices as shown via the US news media, then I switch to Kitco for the truth.
BTW, here’s a list of the Rare Earth Metals/ Elements:
Scandium
Yttrium
Lanthanum
Cerium
Praseodymium
Neodymium
Promethium
Samarium
Europium
Gadolinium
Terbium
Dysprosium
Holmium
Erbium
Thulium
Ytterbium
Lutetium
Any one who didn’t get on the REE train in 2010 missed it . . . but they’ll get another chance at some point in the next year or so, after the market crashes.