Gold Testing Support Again

The price of paper gold broke below $1,700 per ounce again today. We're back to where we were six weeks ago when it bounced from $1,680 up to $1,800.

Having almost reached $2,100 back in March, this is disappointing. It's also a little unnerving because the bounce was without much conviction. We're stuck in a down trend that has lasted five months. However, there's still massive support at around $1,670, as can be seen in the monthly chart. We can also take comfort in the fact that the price of physical gold has hardly budged since the peak back in March.

My local gold dealer, which used to have some forty different gold products for sale is down to ten products. Their 10 gram wafer sells for €588, down only 4% from €612 back in March. Physical supply appears to be tight, and margins wide.

But the situation is precarious. The Fed is acting tough, and people are flocking to safety in cash. This impacts all markets. But some markets are more influenced than others. Stocks are likely to go down faster than the price of gold in the event of a crash. That means that those holding gold will be relatively better off.

The big winners in the event of a crash are always the ones holding cash. However, cash is a more precarious position than gold. The Fed can suddenly start printing money again. Gold, on the other hand, can only be manipulated so far before something breaks.

The best position right now, with stocks and real-estate priced at elevated levels, is a mix of gold and cash, as recommended in my book.

Monthly Gold Chart Captured on July 14