ABC Bullion warns gold price drop won’t last

Australian jewellery retailers should enjoy the current drop in gold prices because they probably won't last long, according to ABC Bullion.
Australian jewellery retailers should enjoy the current drop in gold prices because they probably wont last long, according to ABC Bullion.
The precious metals suppliers chief economist, Jordan Eliseo, told Jewellery World that the company had been selling four to five times more gold than usual since the recent drop in the gold price.
Far from our clients seeing the price drop as the end of the market, they’ve taken it as an opportunity to buy up record quantities, he said.
We’ve got two-hour queues out our door all day, we’ve hired temps to help and our phones are ringing non-stop.
It’s incredibly exciting and we’re delighted so many of our clients see the upside in this move.
Eliseo said that there were three main reasons for the price fall: The first was a scare that Cyprus will need to sell some of its gold to pay for its debts, the second was Goldman Sachs telling people to sell gold as the price will fall, and the third was short-term traders trying to make a quick buck as prices fell.
However despite the swift and brutal fall, Eliseo said the price was already on the way back.
What people need to appreciate is that a correction like this (of over 20 percent) occurred only a few years ago (in 2008) and people said that was the end for gold.
They were dead wrong then as gold has nearly tripled in value since the GFC and anyone thinking this is ˜the end of the gold bull run is wrong as well.
Gold is in a secular bull market, which is likely to take prices many multiples higher in the years ahead.
Corrections like the one we’re seeing are nothing to worry about.
Peter Beck, the managing director of Adelaide-based wedding ring manufacturer and precious metals service provider, Peter W Beck, has also benefited from the recent price drop.
He said it had increased demand for the metal “which is a positive thing for our business.
The fall in price should also be of benefit to our clients, especially if it continues to drop or stay low in the long run.
However Beck doesn’t believe the price will return to its recent low of $1300AUD per ounce.
The recent drop from approx. $1500AUD per ounce to approximately $1300AUD per ounce has been brought about by speculators who drove the drop in price,’ he said.
Once it reached its recent low, the demand for the physical metal at the new price has increased, bringing the price back up to approximately $1400AUD per ounce.
I doubt we will see the price drop again in the foreseeable future to the $1300AUD mark, but it may remain around $1400AUD as what seems to be the new benchmark.
Meanwhile Aram Shishmanian, the CEO of the World Gold Council, has responded to the gold price fall by reassuring the public that gold demand is still strong and that supply remains constrained.
It has become increasingly clear over the course of the past week that the fall in the gold price was triggered by speculative traders operating in the futures markets,’ he said.
Their short-term view of generating a trading profit is in stark contrast to the views of long term investors in gold as evidenced by the massive wave of physical gold buying that began over the weekend and accelerated following Mondays further decline.
The surge in gold purchases is spanning markets from India and China to the US, Japan and Europe. Buyers are viewing this as an opportunity to purchase gold at prices not seen in the past couple of years.
Clearly the desire to own gold, as an investment and for adornment, has made itself felt in the physical market.
Gold operates on the basic economic fundamentals of demand and supply.
Our view is that demand is strong while supply remains constrained, and that this dynamic ultimately drives the long-term price of the metal.
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