If you’re watching spot gold today, I hope you’re sitting down. The dizzying price fluctuations over the last few days seem to be continuing, with spot reaching $1,259 today after having crashed to a three-year low of $1,180 just last week.
It’s gone back up as eager investors buy the dips. While gold is certainly a bargain right now compared to last year when it hovered in the $1,600 range, you may want to hold off buying until it bottoms.
When that will occur is a huge question. It’s always good to check in with the pros.
“I am not convinced this is the bottom,” Investment legend Jim Rogers said at an event in Singapore recently. “Where that bottom will be I have no idea. Perhaps it will be $900-$1,000.”
Economist Nouriel Roubini is predicting a fall to around $1,000, citing low inflation risks and rising real interest rates.
Forbes analyst Augustino Fontevicchia suggested a few days ago gold might fall to $1,000 if it “breaks through key levels of resistance that are fast approaching.”
Goldman Sachs sees gold bottoming out around $1,050 next year, after having dramatically shifted its previously bullish position early this year.
Our own chart reader, Greg Guenthner, is forecasting $1,100 gold for the forseeable future. Greg was predicting gold would get hammered this year as far back as February. On April 9, he noted, “the gold cycle is turning. Avoid the ETFs and miners. If you own them, get out now. These will be the most vulnerable investments as the drop approaches.”
The big drop came on April 15… but more was to come. “The drama is just beginning,” Greg predicted on April 29, shortly after gold fell to $1,321 and snapped back to over $1,470. “Big money is lining up to bet on lower prices — all while small investors embark on a massive buying spree.” Since then, gold has reached lows not seen in three years.
Keep an eye on that price. Now may not be the best time to rush back in.
For The Daily Reckoning
P.S. You can read more of Greg’s forecasts in his Rude Awakening email updates by subscribing to The Daily Reckoning. Just click here!
Jason M. Farrell is a writer based in Washington D.C. and Baltimore, MD. Before joining Agora Financial in 2012 he was a research fellow at the Center for Competitive Politics, where his work was cited by the New York Post, Albany Times Union and the New York State Senate. He has been published at United Liberty, The Federalist, The Daily Caller and LewRockwell.com among many other blogs and news sites.
At the present there will have to be a reason for gold to stop falling. Until that happens it may go lower than anyone can imagine.
Why doesn’t the Fed buy more physical gold from Goldline? Then we could have something…
Unions are beginning to smarten-up. Seeing the inflation in home prices and rents everywhere now, they are beginning to demand $15/hr in wages in the U.S. This inflation shock from the bottom now in labour demands is just beginning. A few self-employed workers are demanding $25/hr in California to come to homes to work. But union in the U.S. is taking on $15/hr. and self-employed is moving onto $25/hr. And you can thank the zero interest rate policy of the Federal Reserve Bank for this inflation shock now. It’s come late, but it’s beginning to show-up now.
Stephen N. Jacobs, Watsonville, California
Union YES ! Why did it take so long to figure this out ? When it takes $200 to buy a grocery cart of groceries to-day, a union worker in a cannery or anywhere in California is going to get a MINIMUM WAGE NOW of $15 per hour or $ 120 MINIMUM WAGE per day. And even that seems very low when compared to the cost of one grocery cart of groceries to-day.
Congratulations to Mr. Bernanke and to the Federal Reserve Bank of the United States. You jack-asses have started an inflationary wage/price spiral. CONGRATULATIONS !!!!!!!!!!!!!!!!!!!!!!!!!!!!!! This should go to 23% just like the last one did in 1974. Remember?????
And you learned this economics in your universities !!! Brilliant !! And you got the good jobs while I ran the coin shoppes.
As the costs—>push to wages wages—> push to prices prices—>costs merry-go-round turned around, and we saw this turn-around in the late 1970’s faster and faster and send interest rates at the Fed higher and higher to stop it……. the Fed pumped money into the merry-go-round to pay for Ronald Reagan’s rotten war in Vietnam. The money that the Fed printed to pay for Reagan’s war allowed the merry-go-round to turn faster, and this forced inflation higher all the way to 18% per year, and the Fed had to drive interest rates up to 23% to stop the merry-go-around driving the inflation. This cut-off the money supply to the economy to fuel the inflation which the Fed had started. The economy crashed, and landing was so hard that Paul Volker said that this mistake would never ever be made again. NEVER !
And along comes Bernanke and a new bunch of university graduated Keynsian economics idiots thirty years on.
Keynsian economics works at the city planning or local planning level for seed economics for example in city planning. For example, one might use government to break with the free market economics in trying to revive a neighbourhood. One might use government money in urban renewal in clearing-out old junk yards or demolishing old buildings. One might use government money in providing atomic energy your city or state/province. One might dredge the St.Lawrence Seaway deeper. One might use government money to build another dam along the Nile River in Egypt to provide for more fresh water in the Nile River Valley.
But Keynsian economics to the extent that it means breaking with classical economics to expand the money supply at federal or international levels has proven to make little or no sense at all. And when used at such levels Keynsian economics seem to be inflationary wherever it is implemented.
What’s coming next? Two things: 1.) pressure is put onto the housing bubble from property taxes, declining incomes of buyers, and credit tightening by lenders; 2.) lending rates rise slightly; and this rise will occur even in spite of a policy of accommodation by the Fed.
We will enter the mistake of the full-out accommodation phase of the Great Recession where the Federal Reserve Bank still makes the mistake of putting too much money into the money supply but even accelerates the printing of money to stay consistent with Keysian economic principles. This accelerates the turning of the cost>push price inflation merry-go-a’round just as it did in the 1970s experience with the inflation during the Vietnam War….The end of the accommodation phase brings much higher interest rates, a collapse of the real estate market and gold prices, and the beginning of a new thinking at the Federal Reserve Bank for a few years.
So down the road we get five more things after the accommodation folly is stopped: 3.) 18% inflation; and 4.) rising interest rates;
5.) a drop in real estate and gold prices; 6.) severe economic downturn 7.) a new director and new thinking at the Federal Reserve Bank.
And can you imagine the universities forgot about this tragedy of the Reagan years and Keynsian economics, so the mistake has to be made again now with Bernanke 33 years later ? Why weren’t all of the economists replaced in 1980 at every university ?
Being a financial newsletter writer certainly has a few advantages. Namely, it affords one the opportunity to comment on the financial markets without having to take them seriously. Today, Bill Bonner looks back on what drew him to this business, and the unique and entertaining cast of characters he's met along the way. Read on...
Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...
This is the time of year when investors are easily distracted. Oil is down, and it’s creating a drastic mispricing in the solar markets. Science expert Stephen Petranek says one solar company is mispriced by as much as 40%... but it might not last until January.
I don't know how low the price of oil will ultimately go in the near future, but I do know that the seeds for an oil price recovery are already being planted by North American shale producers. These companies are dramatically slashing their capital spending plans for 2015, and I believe that the impact on production will surprise the markets…
Our discussions in these pages tend to freak new readers out. Dave Gonigam and Addison spent a fair amount of time last week discussing the implications of a deflationary environment and Fed policies on your existing portfolio. Dave sums up their conclusion in a neat gift box with a tight bow on it in today's essay.