When Will Gold Prices Rebound?
Mon, Apr 22, 2013
Gold And Silver Prices Rebound From 3-Year Low
This just might be a first in financial market history.
Gold’s collapse over the past two weeks continues to bewilder the financial markets.
Is it is a sign of worse things to come?
Was it just the unwinding of a huge trade?
Was it just a long overdue correction after gold’s 11-year run of annual increases?
Or was it all just the “hot money” hedge funds jumping ship from an asset they don’t understand and were just riding the trend?
At this point, we don’t know much. But what we do know lends a great insight in the future price of gold and whether a turnaround is near.
Precious Metals Prices Plummet, Gold and Silver Sales Soar
The one thing we do know is the Gold Price sell-off has sent sales of physical gold and silver to record highs.
The U.S Mint has noted a record surge in sales.
For example, the Mint received orders for 63,000 U.S. Gold Eagles on April 17. And even though we’re just over halfway through April, total sales have hit 147,000 ounces. That’s more than February and March combined.
The chart below puts the gold bullion sales surge in perspective:
As you can see, gold sales are truly at a high point. But it’s not just the mint. There are numerous reports of coin dealers being completely sold out across the country.
The major coin dealers we look at are showing the buying surge is real.
Gainesville Coins, one of the largest bullion dealers in the U.S., is currently offering U.S. Silver Eagles for $29.64 each. That’s a premium of 26% over the spot price of silver. The highest premium I’ve ever seen.
On top of that, the silver coins won’t even ship for almost three weeks.
So we have the price of silver and gold in full collapse and investors buying in record numbers? What’s it really mean?
The answer, based on centuries of financial history, is probably much different than most investors are willing to believe right now.
A True Sign of a Bottom?
The sales surge in gold and silver bullion is a good sign in the short-term. It shows there is a lot of investment demand for precious metals.
That demand has proven it can both support gold and silver. It can even take it up a bit too.
A contrarian investor, however, would seriously have to ask themselves right now:
When in the history of financial markets was a bottom marked by record levels of interest and buying?
The answer, regrettably for people who own more gold and silver than they’re comfortable owning, is that any true turning point (a.k.a. “the bottom”) has never been marked by soaring buying demand for anything.
Throughout history all major downtrends end in a final capitulation sell-off. This leaves an asset completely out of favor and off of most investors’ radars. That’s not what is happening with Gold And Silver Right Now.
Granted, this time always could be different. But it’d be an imprudent move to bet on it being different this time.
Our gold investment advice remains the same since gold prices peaked in 2011 at $1900 per ounce: if you don’t own any gold, get some. If you want to really load up on gold, now may prove to be a good time to buy gold, but history shows there’s likely a better buying opportunity coming in the future.
For More Information : Visit Contrarianinsights.com
Executive Editor, Contrarian Insights
The Group of Big Investors in United States.
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