Quick Take: Gold Drops Below $1,200
NEW YORK (TheStreet) -- The pain for gold won't let up, as the precious metal was down below $1,200 an ounce Friday morning. Here to discuss where it may find possible support is the TheStreet's Joe Deaux and Casey ReportManaging Editor Dan Steinhart.
Although gold has now recovered a bit, it initially dropped by more than $20 in early Friday trading, breaking below the key $1,200 level. But what's the problem with gold and why doesn't anyone want it anymore?
Steinhart has a two-part theory. First, he compared the gold run of the 2000's to the one in the 1970's. There's difference is that the gold run then was because of higher inflation, whereas the current run is from expected higher inflation.
According to CPI measures, which Steinhart admits has its own flaws, we haven't really experienced much inflation.Adding to the downside pressure is the huge rally in equities. Gold investors continue to see the S&P 500 make new high after new high and have finally been cashing out of gold and putting their money into stocks. But what about the gold bugs who are left? Steinhart thinks we are rapidly approaching very long-term support near $1,150. He says that if we can hold this level, gold buyers should be okay for awhile. "Demand from physical gold buyers will outweigh those problems in the intermediate future," he concluded, speaking of demand from countries such as China and India. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
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