Experts interpret gold price tumble

Financial analysts and commentators weigh in on the price of gold as the price fell dramatically Monday.

Hard Assets Investor pointed out,

Investment guru Dennis Gartman commented on CNBC that he's never seen anything like the current gold sell-off.

"There are a lot of people throwing up their hands. Throwing positions overboard. Panic is everywhere," Gartman said. "I've never seen anything like this. I mean it."

Kitco News ran this,

HSBC listed a number of factors influencing bullion, including minutes of a March meeting of the Federal Open Market Committee released last week showing some members favour an early end to quantitative easing. Other factors include a shift out of commodities into equities and bonds, ongoing ETF liquidation and a reduction in speculative net length on Comex, worries that Cyprus will be forced to sell gold and other countries will follow suit to restore sovereign balance sheets, plus the break of technical and psychological support at $1,525 and $1,500 last week.

“Some of these reasons are more powerful than others,” HSBC said. “None of them in isolation truly explains the violence of the move. This type of capitulation needs significant selling by the major players in the market. These sales are fast and large whilst the real buyers are slow and small. Over time, the slow and small over should re-establish an uptrend.”

Bloomberg reported,

“Gold took a beating today because of margin calls” expected on the Comex, Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The Chinese number was the final nail on the head with people exiting from all commodities, including gold.”

The Wall Street Journal reported,

Some [investors] likely were forced to sell to meet "margin calls," or cash that brokers demand from clients to keep bets open.

"All of a sudden, the price is below $1,500, and you have to put up more money," said Jeffrey Christian, chief executive at metals-consulting firm CPM Group. Faced with such choices, more and more investors are choosing to dump their gold holdings rather than risk riding out the selloff, he said.

At the Washington Post,

Central-bank stimulus programs will help buoy gold prices, said Jeffrey Sica, who helps oversee more than $1 billion in assets as the president at Sica Wealth Management LLC in Morristown, New Jersey.

“I see gold being much more stable,” Sica said. “The Fed will not stop printing money, and the quantitative easing will go on until at least the end of the year. What Japan is doing and what the U.S. is doing will continue to support gold prices in the future.”

Over at MarketWatch,

Julian Phillips, contributor to and founder of GoldForecaster.com said he would not sell at this point, “otherwise you may be selling at the bottom.”

“Wait until the fall has slowed and built a base showing it is turning,” he said. “Panic selling on the back of a bear raid is a traditional sign of the bottom. I personally would make myself ready to buy.”

With this from another analyst,

Mark O’Byrne, Dublin-based executive director at GoldCore, said on Monday. “We always caution against trying to ‘catch a falling knife’ and buyers should hold off until we get a few days of higher closes or a weekly higher close.”

 

A columnist with Reuters wrote,

Gold is a canary in the mine for financial markets. Its burst bubble warns of the huge dangers lurking for bonds, commodities and stocks. Those dangers may be at a safe distance now, but they are real.

Gold's lesson for investors is one most know already. Markets are being dangerously distorted by easy money. Corrections will come – and be severe when they do.

Front page image: US Government via Wikimedia Commons