Price of gold takes plunge

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NEW YORK — The price of gold, which has climbed for years like a blood pressure reading for anxious investors, plunged Wednesday to its lowest level in three months.

The price of gold, which has climbed for years, fell Wednesday to its lowest level in three months. It has declined 15 percent since September's peak of $1,907.  FILE/ASSOCIATED PRESS
The price of gold, which has climbed for years, fell Wednesday to its lowest level in three months. It has declined 15 percent since September's peak of $1,907.

Gold fell almost $58 to $1,614 per ounce. It has declined 15 percent since September, when it hit a peak of $1,907. It had more than doubled since the financial crisis three years earlier.

Surprisingly, the fall came on an ugly day in the stock market – the Dow Jones industrial average lost 125 points. Last year, a day like Wednesday would have caused fearful investors to buy gold as a protective investment.

“It’s difficult to forecast, but I think the gold bull market is over,” said Cetin Ciner, a professor of finance at the University of North Carolina-Wilmington. He likened the surge in gold to dot-com stocks before they collapsed.

Some investors buy gold as a hedge against inflation, and minutes from a Federal Reserve meeting that came out Tuesday afternoon suggested that the central bank believes inflation remains under control.

Gold’s attraction as an asset of refuge during crises also seems to have diminished. The economy has picked up, and worst-case scenarios in the United States and Europe have faded.

“Fear has been gold’s best friend, and so to the extent that fear is dissipating, gold should fall,” said Jim Paulsen, the chief investment strategist at Wells Capital Management. “We might look back at these Fed minutes as the line in the sand.”

Nicholas Colas, the chief market strategist at ConvergEx Group, said he thinks gold’s popularity reflects the anxiety of our age.

The price might change, he said, but an ounce of gold is always bound to be worth something. Old stock certificates, he said, might wind up worth no more than toilet paper.

“The gold rush isn’t over,” he said. “It’s just on pause.”

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prov227 04/05/12 - 03:09 pm
Interesting article that

Interesting article that seems to first have appeared in Bloomberg Newsweek and has been picked up by the A/C. Apparently, Prof. Ciner has a set of tea leaves that are pin-pointing the direction of the markets. I tend to agree with Colas that the bull market in gold and commodities are pausing for the next upward push. It seems short term to use a few words from the Federal Reserve as the benchmark for the end of the gold bull. What were the Fed's words that started it in 1999? The last gold bull was stopped in 1980 when the Fed sharply increased interest rates allowing the US Dollar to appear to become worth more as its purchasing power decreases yearly. Unfortunately, (if we can believe them) the Fed says it won't increase interest rates until 2014, at the earliest. All stock market cycles since the 1920s have gone for 15-20 years before starting a new (bull or bear) cycle. We're only approximately 13 years in the current bear market. I think it may be wishful thinking about our "recovery". Nothing has reduced the national debt and it is compounding daily. Real estate has not "bounced".

Unfortunately, these types of articles have appeared when gold reached $400 from its low $250, when it reached $850 (its previous high in 1980), when it reached $1200, etc., etc. Sometimes you have to throw caution to the wind.

As far as the "fear" thing, all markets are driven by fear and/or greed. Fear of not setting aside enough for retirement and relying on the market to protect it. Greed that promotes some to jump on a "bull" bandwagon when it is in its final stages of its cycle.

All investments should remain diversified and gold should be a part of that investment array, so that an investor can switch into a primary trend asset. Gold has been a primary trend asset since 1999. What was your financial planner advising you about precious metals in 2003? What, stay away, too volatile, doesn't pay "interest". If you did follow someone's advice to stay away from gold, in favor of stocks, bonds and real estate. you missed the single best investment in the past decade with an average 47% annualized return from 2001 - 2011. Silver performed even better.

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