Some Silver Lining In Gold Price Drop

Some Silver Lining in Gold Price Drop

It's hard to find any good news in the precipitous gold price drop that occurred over the last two trading sessions, but a scan through the Web shows that some gold market commentators are remaining positive and not crying “bear” for the gold market as many in the mainstream media appear to be doing.

First off is Peter Schiff, founder of EuroPacific Capital and renowned gold supporter, who is quoted by  CNBC as saying that gold will regain strength despite the current sell-off. Schiff wrote:

“While nations buying gold will pay for their purchases with dollars, the sellers will not re-invest the proceeds into Treasurys. Dollars raised through gold sales will be converted to local currency and used to repay debt.

“This will put downward pressure on both the US dollar and Treasurys. In addition, emerging market central bankers will be more likely to hold onto gold for the long term, thereby providing a bullish impact on the market. In essence, such a shift would flush out the weak hands who don't have the resources to protect their wealth in favor of stronger hands that do.”

In the article that quotes Schiff, author Jeff Cox noted that the gold selloff is unlikely to have much impact on other markets, arguing that similar events have actually moved stocks higher.

“Precious metals are coming off the same reason the stock market is going up — because confidence is improving,” he quoted Jim Paulsen, chief market strategist at Wells Capital Management, as saying. “You see that armageddon premium in gold and silver coming out.”

US precious metals analyst Jeff Nichols said in comments to  Mineweb that the gold price was driven “insanely lower” on Friday, meaning the drop was caused by “technical and computer-driven me3 trading mainly in futures, forward, and options markets, rather than by any change in fundamentals or in the states of the U.S. and global economies.”

While not predicting Monday's even worse gold price fall, Nichols sees high volatility short term but long-term strength building: