the price of gold dropped over $100 an ounce. That is the largest single day dollar value drop in gold prices on record.
The $100 drop is a 6% drop in one day. Gold peaked at a whopping $1895 earlier this month on Sept. 5th. With it now trading at $1657 that is a drop of 12% within 3 weeks time.
For a while I've had a negative outlook on gold prices. I've felt that gold was in a bubble that is going to burst sooner or later.
Last year I gave my thoughts on how fast could gold drop? It can drop a lot in not too short a time. Gold has dropped as much as 43% in as short as 2 months. And over 2.5 years from Jan. 1980 to June 1982 it lost 65% of its value.
My history on predicting gold has not been great. I first looked at gold nearly 3 years ago when I examined the Historical prices of gold I found that gold prices have been volatile and not had great returns over the long run and decided that in my opinion that gold is not a solid investment. Since I wrote that gold more than doubled in value in 3 years. Later in 2009 I stated my opinion that gold had peaked over a year ago I was clearly proven wrong when it hit a new record high just a few months after that
I also considered the question Is Gold a good inflation hedge? My conclusion was that it isn't really.
I'm still of the opinion that gold is in a bubble and it will eventually pop and drop in value considerably. It could drop another 20-50% this year. Heck why not... I'll go ahead and put myself on record with another prediction on gold prices. I am thinking gold will drop under $1300 by the end of 2011 and then be under $1000 by the end of 2012. But given my poor record predicting the direction of gold prices I wouldn't bet anything on my predictions. Its also possible that gold could recover and then double in value within 12-24 months. We'll just have to wait and see.
For the record, I do not own any gold or gold investments. My wife had some shares of a gold mutual fund but she sold it. I'm not sure exactly what her return on that investment was.
Image by digitalmoneyworld