The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Gold prices yesterday suffered their sharpest fall since the 1980's, heightening fears among investors that the precious metal’s decade-long Bull Run has ended. Gold’s two-day drop (since Friday) was the sharpest two-day tumble since 1983, when the last gold bull market unraveled. Silver has also taken a major blow, losing more than 35% from the November highs. We have seen several large banks the past few weeks downgrading their recommendations on gold (Credit Suisse, SocGen, Goldman Sachs and more), but the straw that seems to have broken the camel’s back, is Cyprus’ decision to sell a portion of its gold reserves as part of their bail-out deal. This has dealt a sharp blow to the confidence of the gold bulls, arousing fears that other Eurozone countries, with much larger gold reserves, could soon be forced to follow suit. There is also some talk that with more stabilizing global economies Central Bankers may soon go back to practices of the past when they were net sellers of gold reserves. I am afraid the massive down stroke, now places the margin calls gods in control and further liquidation could be seen. Remember, many massive funds have been building and holding huge long gold positions the past few years. Liquidation could certainly cause further price deterioration. I thought my buddy Tom Grisafi (professional trader) said it best, "The markets most generally like to take the stairs when going higher, but tend to take the elevator when going lower..." Bottom-line, those looking to add to their "physical" holdings may want to be patient. To follow my thoughts on any of the commodity markets please CLICK HERE.
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