The CME last raised margins on August 11th by 22% and prices suffered just a modest decline. Overall, in 2011 margins for gold have increased $3,375 as compared to $11,137.50 for silver, suggesting that the damage to gold prices might not be as profound. Although many experts acknowledge that gold prices could bounce, most seem to be anticipating more of a selloff. Experts are looking towards the $1,680-$1,650 level. Any continued good macro news out of the U.S. will also trigger more selling as investors feel better about owning stocks and turn away from the safe haven. "I believe that gold will temporarily hold in the low $1,700s," says David Banister, chief investment strategist at TheMarketTrendForecast.com, "and possibly even counter trend up into the $1,780-$1,810 range ... but I think following that there should still be some work on the downside." Stanley Crouch, chief investment officer of Aegis Capital, thinks there is more momentum traders to get washed out, there is "likely to be a lot more extremes of volatility." Crouch also believes that if there is a global slowdown economically then investors could "pull the plug on the commodity rally in general because as demand destruction occurs ... and if the dollar strengthens relatively to the other currencies ... gold would trade off in that scenario." Ross Norman, CEO of Sharps Pixley, takes the opposite view. He thinks the fear premium has been taken out of gold -- that is that those investors who panicked over the fear of a double dip recession and ballooning debt loads have exited the market. If Federal Reserve Chairman, Ben Bernanke, pulls a rabbit out of his hat on Friday and announces more monetary easing to jump start the economy, and hence the stock market, investors could be sucked away from gold and into stocks. "Gold prices have been rising at a compound 16.8% per annum since the bull run began 11 years ago," says Norman, who says that the rate of price increase has accelerated since 2008 to 20.3% as safe haven seekers entered the market. "The extra 3.5% compound could possibly be attributed to the so-called 'fear factor' or safe haven role of gold. These assumptions being so, then removing that fear element in expectation of some positive noises from Bernanke would take us back to $1720 -- exactly the current market price. In short, the fear premium has been removed." The selloff had many investors worried that gold's plummet will echo that of 1980, when the gold price reached $850 and then did nothing for 20 years. But there are some fundamental differences. In 1980, in six months, gold climbed 193% and then tanked 43% in the next two months.
Alix Steel in New York. >To contact the writer of this article, click here: Alix Steel.