Gold - Deflation, Forced selling or Demand destruction?
Gold is approaching levels it first attained in mid-2006:
Despite the wild markets in September & October, gold didnt climb too high (and definitely didn’t make new highs) - so much for it’s safe haven status. I imagine the drop to almost $700 / oz is a combination of:
- Deflation expectations - have you seen TIPS lately?
- Forced selling by hedge funds (margin calls, sell whatever can be sold)
- Demand destruction - retail sales in India dropped off a cliff, except for a short Diwali pop; I can’t imagine things will be any better in China over the next few months
FWIW, I expect gold to drop below Rs 9500 per 10 gms by next year. Of course, the huge movements in the rupee will have a major impact - imagine if US gold drops below $600/oz, and the Indian rupee strengthens to 45 versus the USD.
More on this topic
(What's this?)
“Make $2 Every Time Gold Goes up a Buck ” McCoach
(Stock Gumshoe, 11/4/08)
The Five Best Ways to Invest in Gold Today
(Money Morning, 12/20/08)
Is Gold Finally Breaking Out?
(Blogging the Commodity Bull Market, 11/24/08)
Three Big Pieces of News for Gold Investors
(Blogging the Commodity Bull Market, 11/22/08)
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