Monday, May 9, 2011

Last Week's Plummet Didn't Change Much For Gold

That's the conclusion of a Mineweb article, which says that gold's long-term prospects still remain the same as they were before the metal's run-up above $1,500 and spectacular fall last week.
Mineweb finds itself asking the same question it did during the metal's first breach through $1,500: "What has actually changed".

It is a question very succinctly answered by Adrian Ash, who wrote on Mineweb, "Nothing. Absolutely nothing. There's no more or less of it in the world today than there was a day or a week ago, and very little more than a month ago. There's barely 15% more today, in fact, than there was a decade ago at $270. Gold still has very few industrial uses - only 11% of 2010 global demand - and the stuff remains indestructible. It never changes or does anything. Hell, it won't even rust. But what is changing is everything else - the volume and quality of debt, in particular, and the volume of US Dollars most especially."
In other words, the same long-term drivers are in place for gold to stick to its long-term bull market. Gold got ahead of itself late last month.

This conclusion may seem trite, but such reassurances have their place. Seeing a $100 fall over the course of a week isn't a pleasant sight, and such plummets do tend to induce fear that the bull market is over. Gold may have a tough time in the next several months, but there's no reason to fear that the long-term bull market's over as of now. These reminders help when bad news swamps the news cycle and gold skeptics have their day in the sun.

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