You Might Get Your Shot to Buy Gold Stocks Soon

Sep 23, 2011
J. Webster
Comments Off on You Might Get Your Shot to Buy Gold Stocks Soon

It appears that all the big time players, the hedge funds and the gold bugs (those who love gold stocks), are starting to scale out of their gold positions or rush out of them if they’re getting redemption calls or just need to raise capital. Some are saying the gold bubble has even popped – that gold is going to go down faster than it went up.

After a month of unprecedented volatility that has rattled some investors’ confidence in gold’s decade-long winning streak, the question is obvious: Is this what the popping of a gold bubble looks like?

The answer, of course, isn’t obvious. The bursting of asset bubbles is best seen in retrospect, and gold’s 10 percent decline from a record high just three weeks ago is far from its worst tumble; it last suffered such a setback in late 2009, and multiple times in 2008. It is only halfway to the 20 percent mark that separates a correction from a bear market.

While a survey of the best minds of the bullion market predicted this week that gold would continue to power higher over the next year, topping $2,000 an ounce, there are undeniable warning signs flashing along the way, threatening to undermine one of this year’s top-performing assets.

However, most likely, gold will come down and a new cycle will start again, and this is where the investor who doesn’t or hasn’t own gold stocks will have their chance to get in. Right now, gold costs $1,739.20 an ounce, down over $66. Most ‘experts’ agree that gold still could see a $2,000 an ounce price by years end and, in the years to come, shoot past even that number. Gold though has had a hell of a run up, and now some are traders are taking profits. How low will gold go though before it starts climbing back up? That’s the big question.

From the NY Times:

For the better part of the last two years, some of the world’s biggest hedge funds have been piling into gold, betting the precious metal would provide an effective hedge against inflation or be a safer place to park cash as equity markets around the world stumbled.

But to the surprise of many investors, when equity markets across the globe tumbled once again on Thursday, gold moved sharply lower as well.

Gold futures for September delivery fell $66.30, or 3.7 percent, to $1,739.20 an ounce in New York. It was quite a turnabout for the metal, which has been soaring in recent months amid the turbulent stock markets.

Hedge funds, which have been ratcheting down their positions in gold futures since early August, were quickly named as the culprits in the latest sell-off.

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