Home Forums Hunting & Shooting Hunter's Campfire What Will Be The Bottom Of The Precious Metals Drop?

Spain<Greece,gthe euro and China's economic woes will be interesting to watch over the next 6 months.
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By Myra P. Saefong and V. Phani Kumar, MarketWatch

SAN FRANCISCO (MarketWatch) � Gold futures finished lower Tuesday, giving back nearly all of their gains from a two-session advance, as a drop in the euro after a Spanish ratings downgrade fueled renewed strength in the U.S. dollar, weighing on dollar-denominated gold.

Gold for August delivery /quotes/zigman/676896 GCQ2 +0.24% , which is the most-active contract, fell $20.20, or 1.3%, to settle at $1,551 an ounce on the Comex division of the New York Mercantile Exchange.

June gold /quotes/zigman/661661 GCM2 +0.22% , which is still actively traded, lost the same amount to finish at $1,548.70.

August gold had climbed more than $14 earlier to touch a high of $1,585 and had tallied a gain of $20.60 over the past two trading sessions. Regular trading on Comex was closed Monday for a holiday.

As problems in the euro zone intensify, traders have flocked to the U.S. dollar as a safe haven. On Friday, the greenback rose to its highest level since 2010.

�The dollar strength and lack of interest in gold as a place for safety has led gold to test the $1,550 area today which has provided some support,� said Charles Nedoss, a senior market strategist with Olympus Futures in Chicago, in emailed comments.

But �a close under this level could prompt further downside probing into the $1,520-$1,530 area,� he added.

July silver prices /quotes/zigman/690082 SIN2 -0.42% lost the most ground among the precious metals, losing 60 cents, or 2.1%, to settle at $27.79 an ounce.

Dollar bounce
�Gold had a swift and negative reaction to the U.S. dollar firming up in the middle of the trading session along with weaker oil prices,� said Jeff Wright, managing director at Global Hunter Securities.

�All of this is in reaction to news of a downgrade by Egan-Jones in the credit rating of Spain,� he said. �We view Spain as the best line of defense to save the euro zone and have already factored Greece defaulting on their debts and exiting the euro this summer.�

Against this backdrop, the euro /quotes/zigman/4867933/sampled EURUSD -0.42% fell under $1.25 Tuesday after Egan-Jones Ratings Co. downgraded Spain�s credit rating to BB- from B. Read more on currencies.

The downgrade on Spain is �obviously bullish for gold but gold can often be correlated with risk assets such as the euro and equities in the short term,� said Mark O�Byrne, executive director at GoldCore.

Investors, instead, favored the greenback, sending the ICE dollar index /quotes/zigman/1652083 DXY +0.13% , which measures the dollar against a basket of major rivals, to 82.540, up from 82.228 in North American trade on Monday, and above the 82.416 level seen late on Friday.

Strength in the greenback tends to pressure demand for dollar-denominated commodities such as gold.

�It�s my view that gold doesn�t react as a safe haven in reaction to financial crisis,� said Brien Lundin, editor of Gold Newsletter. �Rather, it reacts positively to the remedies prescribed for such crises, which is almost always money creation of some sort.�

�Once it becomes apparent that we�ll see such money creation, then gold will begin to respond in a significant fashion,� he said. �Until then, however, we�ll continue to see high volatility, such as that seen today.�

But wait! I thought the US Dollar index was supposed to be in the 50's by now.

I am just waiting on TRH to come in here and school us on how it isn't right to compare the price of gold in Federal Reserve Notes since it isn't looking so favorable. I am sure he will recycle the current excuse that gold's value stays constant. Constant to what?

Oh, but the Chinese have made all the right moves. They will dominate the world with their hording of commodities and massive amount of gold mining.

More Chinese Said to Seek Investor Visas

Don't know if it will be the bottom, but as soon as gold hits $300 an ounce again I'm gonna be a buyer! Still kicking myself for listening to my financial adviser and not doing it back in 1998.

Then you will never be a buyer again. What magic could possibly restore faith in the US FRN to that degree?

The recent surge in the strength of the FRN (what you folks are mischaracterizing as a drop in the value of gold and silver) was predicted by the Austrian School. It's a simple factor of people losing faith in other paper currencies and seeking a safe haven. The US dollar is a traditional safe haven (because until 1971 it was backed by gold, and old patterns of behavior die hard), so that's where folks flock, thus increasing the demand for and thus the strength of the FRN. This provides a buying opportunity for gold and silver, but only briefly. All the fundamentals are aligned against the FRN, since the Fed can only continue printing and borrowing, and the US Government can only continue to spend what it doesn't have. The FRN has been given, in other words, a short reprieve. Take advantage of it.

Fixed it for you

The inability or complete refusal to learn and understand the global economies' interaction and impact upon futures will be financial death knell for many.

Folks simply can't understand that for all this nation's financial woes,we still are leaps and bounds ahead of other nations. Those nations seeking refuge in the dollar is telling,save for those wearing the blinders and ignorance of perpetual doom and gloom.

The status of the dollar as the world's reserve currency and safety net will remin intact through our grandchildren's lifespans.

Have you been living a hermit's existence these past several years, without access to current news?

Your ignorance is expected and understandable.

My position is based on a sober analysis of the prevailing facts. Your's is simply a product of the normalcy bias.

You need to look in the mirror. Bob is right.

You haven't a clue as to what is going on in this world outside the confines of RP or Prison Planet newsletters and blogs,sprinkled with Alex Jones videos.

Oh, is he now? I'd better alter my position to match his, then.

Strategic thinking isn't your forte.

Just be grateful you'll be able to salvage your bling trinkets and not have to worry about a margin call.

Your conclusions after your analysis of the "facts" are way off base. Bob's conclusions are far closer to correct. You are not even in the ballpark.

Yet I'm able to perceive that the US is sitting on a mountain of exponentially increasing debt that it cannot possibly ever repay, on which it will soon be unable even to pay the interest from tax revenues, requiring massive and upward spiraling inflation by the Fed. Apply fundamental monetary economics to that fact pattern and tell me again how the future for the FRN is looking good to you.

I see.

You have been analyzing all these amongst other "facts" for years. How has that been working out for you? It looks like you shoulda Yinged when you Yanged.

Go opposite of yourself for a while and see if things don't improve.

You're not making sense. Everything advocates of free market economics and monetary policy have been saying for decades has only been proved accurate.

"The Titanic is a marvel of engineering and industry! Not even God could sink her..."

How apropos.