According to an ABC News article on December 8, 2010, investors are beginning to believe they are able to see the light at the end of the tunnel of the current recession. Due to a proposal to extend tax cuts and unemployment benefits, investors believe they no longer need the safety net liquidity of precious metal investments, so live gold prices for delivery in February fell 25.8 United States Dollars and closed at 1,383.20 United States Dollars per ounce.
This is one of the most common trends in the economic market; precious resources whose values are well known and understood are bought when times look bad, and sold otherwise. Physical ownership of gold allows a feeling of security in troubled economic times. Add to that the high liquidity of this particular asset, and the fact that some forms (e.g. gold bullion coins) are guaranteed by the government, and it becomes an immediate must-have addition to a portfolio as soon as stock opportunities begin to look bleak.
When market prices show the first signs of moving toward bullishness and regaining strength, a majority of investors immediately withdraw from the precious metals sectors in order to put their money where they might see more immediate gains. A beneficial way to diversify one’s portfolio, and a way to gain a little bit of security even in times of economic prosperity, would be to buy a bit of gold bullion while the market is riding high, after all, everyone needs a bit of security.
According to Market Watch’s article (also Dec. 8, 2010), by Claudia Assis and Sarah Turner, there was a different primary reason for the fall of live gold prices. They state it was due to an announcement that China is going to release new reports on Saturday, December 11, instead of the scheduled Monday, December 13. Many feared that China would implement a higher interest rate, and thus sold their gold; their government, however, stated it was merely to keep monthly release dates as similar as possible.
Whether due to fears of interest hikes or hope in a recovering market, the gold stock fell almost two percent in one day, a considerable fall for such a large stock. But, alas, what goes down must eventually come up, so the time to take advantage of a lowering gold price per ounce may be soon upon us.