This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

'Perfect Storm' Sends Gold Bugs Scurrying (Update 5)

Stocks in this article: GLD IAU SGOL ABX GDXJ

Updated from 5:50 p.m. ET with CME Group statement raising margins on gold.

NEW YORK ( TheStreet) -- Gold prices plummeted for a historic two-day collapse on Monday as liquidation pressure and long-only funds continued a huge selloff in the yellow metal.

Gold for June delivery on the COMEX dropped $140.30, or 9.3%, to $1,361.10 an ounce. The gold price traded as high as $1,495 and as low as $1,355.30 an ounce. The spot price dropped $124.40 an ounce, according to Kitco's gold index.

Monday marked the largest percentage drop in gold since Feb. 28, 1983, when the price dropped 12.1%, according to Bloomberg data.

"There are an awful lot of people hurt, there's any number of rumors, innuendo, theories as to why this has occurred, but the public was long of gold," Dennis Gartman, editor of The Gartman Letter told TheStreet. "You had a perfect storm of circumstances prevailing: you had technical chart patterns being broken, you had the Cyprus situation, you have the GDP in China, you had the backwardations in crude oil beginning to narrow dramatically . . . you have a new crop of corn that looks like it's going to be sizable being planted."

Gartman said all of this added up to an impending perfect storm of liquidation.

On Friday, prices broke through multiple levels of technical support and many analysts have suggested in interviews that the yellow metal's break below about $1,525 an ounce triggered the two-day free fall the market has seen. Simply, traders continue to test lower bounds to see how far gold will drop before buyers reenter to stabilize prices and reestablish new long positions.

Some investors were looking for a bottom in gold's drop, and some prominent fund managers remained optimistic, despite Monday's tailspin.

"We set up the gold share class at an average cost of around $950 in April 2009 and while it's down from its peak, it's up considerably from our cost," John Reade, partner and gold strategist at Paulson & Co., said in an email. "While gold can be volatile in the short term, and is going through one of its periodic adjustments, we believe the long term trend of increasing demand for gold in lieu of paper is intact."

Central banks, including the Federal Reserve, European Central Bank, Bank of England and Bank of Japan, among others, continue to stress their commitment to monetary easing policies. The Bank of Japan announced on April 4 a massive monetary stimulus program that would include $520 billion in government bond purchases over a 12-month period.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs