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 a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals.

Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach.

Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. 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 keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"

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