Gold Prices: A Sign of Identity Crisis?

Gold prices broke down through 1220 (USD/oz) yesterday, with the trend continuing to look down in pre-market trading today.  This has left many gold bulls scratching their heads, wondering if people don’t understand the probable future effects of US and international debt, rising interest rates and few true safe havens left in the world today.

Reuters International put out a nice article overnight explaining some finer points of the bear case – specifically, that gold may have lost it’s traditional safe-haven status as more investors have learned how to trade currencies.  For example, recently the US Dollar – Japanese Yen currency trade offered more return than simply trading in and out of gold. If such a trend persists it may put gold in a bad spot; logically gold would then revert to commodity pricing “rules”, which to this Gold Enthusiast’s eyes would price it between 850-1050 USD.  

That would be bad for gold bears indeed. At least until the next major geopolitical crisis, when all currencies would probably drop and investors would flee for … gold? Now there’s a thought. You can read about this interesting aspect of the bear case in today’s featured article.

 Related: Jim Cramer Has Some Interesting Thoughts on Gold [VIDEO]

About the author

Mike Hammer

Mike Hammer has had a wide-ranging career, with trading and investing as continuing themes. Mike graduated with a business degree and spent years as a financial advisor, before moving to New York and to pursue a career in IT and education. For more than a decade Mike has been working with the Adam Mesh Trading Group as a stock market and commodities mentor. He’s trained over 200 individuals, spoken at several national conventions, and is a frequent contributor to educational webinars.

Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keeps him in touch with "the student mindset".

Mike focuses on the precious metals markets, the energy industry, and the financial sector. His motto is "Plan your trade, then trade your plan!"

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