As the long-term store of value that most gold investors understand their gold holdings to be, nothing has happened to change the bigger picture for gold.
Those who've been paying attention will know that gold has been taking a beating over the past month. From $1287.10/oz on September 1st the yellow metal fell all the way to $1186.10 this past weekend. It's been a fairly steady decline, with perhaps the most dramatic drop coming last week when the price fell $30/oz in 36 hours.
As of press time, the price has recovered back over the $1200 mark, but the question for gold watchers is whether or not $1200 is the new floor or the new ceiling.
The bears are gloating now, especially since this week's mini-recovery was also predicted by them as part of a continuing downward trend. Late last month as the gold price plunged under the $1200 mark UBS held their 1-month forecast at $1250 but cut its 3-month expectation to $1200 (from $1300) on the bet that a short term rally would fizzle out toward the end of the year as the price starts declining once again. How low will it go? Bank of America Merrill Lynch analysts are now predicting that “prices may touch $1,100/oz at some stage next year.”
The bulls are obviously on the defensive at this point. They point out that $1200 may be forming as a long-term market bottom, as this is now the third attempt to break below the $1200 mark since June of last year and each time that mark has held. Even the bulls have to admit that there are multiple pressures on the precious metals markets at the moment, though. Equities markets are still riding high on the Fed's phony baloney funny money, taking away the luster of gold as a flight-to-safety investment. The dollar continues to strengthen against the world's other faltering currencies and interest rates are rising, all of which exert a downward pressure on the gold price.
But as the bulls point out, the same fundamentals that were in place last year (or two years ago, or three years ago, or...) are still in place today. Equities markets are still over-inflated and destined to pop at some point. The staggering expansion of fiat money supply throughout the world in the past five years is still finding its way out into the economy. Central banks around the world are still buying and storing gold and people are still buying it (although demand in China has cooled off from last year's record levels).
As the long-term store of value that most gold investors understand their gold holdings to be, nothing has happened to change the bigger picture for gold. It has been a long, sometimes sharp slope downward from the 2009 highs, however, and there may be further to go before the market finds its bottom.