The stock market crashed a record-setting 777 points on Monday – and global markets took a tough tumble as well. But where does this leave the precious metals? Bryon King explains:
“Yes, the prices of gold and silver rose on Monday. But gold mining shares declined along with all the other stocks. What was that all about? In my view, it was panic selling. In the wake of the failed bailout story out of Washington, D.C., big shareholders dumped everything over the side. Even the good stuff went into Davy Jones’s locker.
“Also, Monday was Sept. 29, the next-to-last day of the third quarter. So some last-minute actors were cleaning house. Better late than never? They sold anything that could show a profit (or get rid of a loss).
“But sell the gold and silver? Let’s think this through. Have you tried to buy physical metal lately? Good luck. The U.S. Mint is all but sold out of coins. Indeed, the U.S. Mint has placed its dealers on allocation. The Royal Canadian Mint is working flat out to meet the demand for Maple Leafs. And South Africa’s Rand Refinery – which supplies the world’s most popular gold coin, the Krugerrand – is now running at full capacity seven days a week. Got gold?
“So what’s the story for physical gold? There’s strong demand for real metal. According to the Financial Times, ‘Investors in gold are demanding ‘unprecedented’ physical levels of bullion bars and coins and moving them into their own vaults as fears about the global financial system deepen.’
“What do these gold investors know? Evidently, the posted price for gold is low. It’s another way of saying that gold is underpriced relative to true demand. In fact, the posted price is clearing the market like a vacuum cleaner.”
for Markets and Money