Gold News

'Tis But a Scratch!

The current drop in Gold Prices – so far, at least – barely shows against other sell-offs to date...

WHATEVER REASON you cite for this week's swoon in Gold Prices to $1160 per ounce and lower, 'tis but a scratch so far, says Adrian Ash at BullionVault.

The current options contract on Gold Futures expired Wednesday, guaranteeing volatility. Because as longer-term speculators moved to rollover their position in the derivatives market, banks taking the other side of the trade were only too happy to oblige.

More broadly, active traders would always expect to see a seasonal lull – if not drop – in Gold Prices between July and Sept. India's gold-hungry millions don't buy over the summer, but wait until autumn's post-harvest Diwali festival instead. And after the huge gains spurred by the Greek crisis of April and May, a pullback was long overdue.

That's not to say the Gold Price bull market starting a decade ago hasn't just met it's end. Some in the mainstream investment media certainly want to see it that way, even if – like this guy at the Sydney Morning Herald – they're driven more by resentment of gold's recent gains than analysis of its future.

But either way, and like Monty Python's Black Knight says, the gold market has had far worse cuts than this...

Losing a little over 9% from last month's top to date, the gold price in Dollars would have to reach $1073 an ounce before matching the 15% drops of Dec '09-Jan '10 and Feb-Apr '09.

Gold would need to hit $948 an ounce before matching the 25% drop of May-Jun '06. And it would have to reach $834 before matching the 33% Mar-Sept. loss of 2008.

This current swoon is also a good way from setting new records for pace, too. Top to bottom, it's nothing – so far – next to the 16% week-on-week drops of June 2006 and Sept. 2008.

Small comfort to investors or traders picking last week's dip as a bargain, perhaps. But so far, it's only a scratch.

Buying Gold on the dips? Choose your moment, and set your own price, with direct access to live pricing for physical gold at BullionVault...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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