Gold Takes a Dive: Should You Worry?

Today is an official two-year low for gold, with prices taking an accelerated  free fall of  more than 20 percent. Analysts expect more of the same this week.

The price of gold in early New York trading this am came in at around $1,420.50 per troy ounce–that’s down more than 9 percent from the price it had last Thursday, and  down from where it closed at Oct. 4, 2012.

Other precious metals were also hit by heavy selling, with silver falling to its lowest since October 2010, platinum at its weakest since August last year, and palladium hitting a three-month low.

So what’s the deal? Is gold’s nearly 12-year bull run as a precious commodity coming to an end?

“Many reasons have been put forward to explain the sudden change of course, including speculation that Cyprus may sell a chunk of its gold reserves to raise around 400 million euros or $535 dollars.

“Investors are worried that Cyprus can set a precedent and other central banks follow, and this is bearish also considering that one of the pillars for gold’s bull-run in recent years has been central banks’ buying,” analysts say.

Meanwhile a hint that monetary stimulus might be reduced by the United States could further dent gold’s appeal.

To some, a drop in price isn’t a bad thing (or a conspiracy).

Au contraire! According to Business Insider’s Joe Weisenthal, the man of “Hey, the March jobs report was ‘GREAT’” fame, everyone should be “thrilled” about the decline in gold.

“Investing in gold is a rejection of government money and finance. Money flowing into gold-related assets represents a belief that rocks (however shiny they are) are a better place to invest than human endeavors (like stocks),” he notes, adding that the events following 9/11 “shook our faith in humanity” and drove people into the arms of gold.

So ultimately, the decline of gold and the rise of stocks is a big trend that everyone should cheer about.

The biggest disappointment may come to those in search of “bling”.

Time to go out and buy those gold hoops? Not so much..

Sadly, Retail jewelry prices are less market-driven. The prices at the counter factor in much more than the market rate for materials: the design and brand, as well as costs for manufacturing and profit for the seller.

“The gold has been invested in already and the jewelry has been made,” says David Bonaparte, chief executive of Jewelers of America, a trade group. Plus, it is unlikely a piece is entirely gold — typically 14 or 18 karat gold is used, which are about 58% and 75% gold, respectively. Jewelry may also be plated with gold, instead of made entirely from it,” Bonaparte says.

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