The price of gold and silver has fallen substantially

David McEwen

Tuesday 27th September 2011 2 Comments

The price of gold and silver has fallen substantially in the past few days, the latter by over 15%. This suggests speculation in precious metals had been substantial and profit taking is now going on.

On the other hand, the US$ has also been strengthening, which might be pushing investors to the sidelines.

Some observers believe gold and silver have been in a bubble while others say it is the only true store of value in a world where central banks are creating money and credit seemingly without limit.

I lean towards the latter view but investors should let the trend be their friend and trim holdings, or at least refrain from buying until prices stabilise.

If you look at both metals, it is obvious that silver is more likely to be in a bubble. Its price had risen by 150% over the past two years, while gold has ‘only’ risen by 80%.

The macro trend for both, however, remains upwards and I note UK-based Barclays Capital, America's The Brink’s Co, Germany's Deutsche Bank, Australia's Perth Mint and a company called Swiss Precious Metals (which may or may not be based in Switzerland) have all been reported recently as saying they are running out of storage space for gold being deposited by clients.

This is further evidence that the 'third wave' of gold's popularity is upon us and that demand at the individual investors’ level is rising fast. I still think there is some way to go yet before fully fledged gold mania sets in so it is not too late to buy some bullion or gold mining shares

Comments from our readers

On 27 September 2011 at 5:08 pm Bob said:

Actually the reason for the fall was the hike in gold and silver margin requirements by the CME group on Friday. CME runs the New York Mercantile Exchange. It hiked margins on Comex gold futures contracts by 21.28% and on silver futures contracts by 15.63%. Another example of changing the rules in midstream and manipulation of the financial markets

On 28 September 2011 at 11:32 am Peter said:

The ratio of the price of platinum to the price of gold is also interesting. A few years ago platinum cost more than twice as much as gold. Now platinum costs less than gold. I found Bob's comment on the margins very interesting. I didn't know that, and would be interested to know how Bob learned it.