Much like silver, gold prices are flirting with four-month lows. There’s a lot of reasons why. You just have to pick your favorite poison:
1) October’s inflation numbers were extremely low at 1 percent.
2) There’s a perception that the Federal Reserve could taper its bond-buying program sooner than expected. In recent meeting minutes, officials seemed to support tapering even if the job market doesn’t improve substantially.
3) The job market’s holding up better than analysts thought. “Individuals filing for initial jobless benefits in the U.S. last week fell by 21,000 to a seasonally adjusted 323,000, beating expectations for a decline of 9,000,” Investing.com reports.
4) There’s a bull market in stocks. That makes it hard to hold cash in gold and silver when you’re watching other asset classes outperform – especially with the Nasdaq up more than 30 percent YTD.
5) China’s contributing to record gold production. “Mining production in the country surged by 4.9% to a good 253 tons in the first nine months of the year,” according to the China Gold Association (source).
6) The Venezuelan central bank is selling 45 tons of gold to Goldman Sachs through 2020. Look for that metal to hit the market further depressing prices (source).
7) ETFs are driving prices down faster than they might have otherwise fallen. Investors can move in and out of gold (via ETFs) faster than ever before. That creates a feedback loop in the physical markets. ETFs sell off and more gold floods the market driving prices down further and prompting more people to sell off their ETF holdings.
8) Gold selling was so heavy on Thursday that the Comex actually halted trading of the metal twice. Resource Investor reports that the exchange was hit with some $200 million in simultaneous sell orders.
9) Speculators could be moving into bitcoin as a proxy for gold and silver. Check out my post: “The case for bitcoin at $100,000.”
The bleeding will stop eventually, but I wouldn’t be “bargain-hunting” right now. Buying into falling prices is the easiest way to dig yourself into a hole. That’s called “catching a falling knife” for a reason. Wait until prices “base” or flatline to consider accumulating gold. In the meantime, take a look at bitcoin in my post Bitcoin inflation hedge: The new gold and silver.