In an interview with King World News, veteran observer and analyst Dan Norcini explained the cause of this week’s dip in gold and silver prices. This dip has led some to question the strength of these markets but Norcini has another take that’s important to consider.
Just this week, gold and silver have taken a beating. Gold in fact fell below its 200-day moving average and support level of $1680, which caused even more selling.
Still though, looking year-to-date, both gold and silver have gained.
But what’s driving this seemingly steep sell-off here in the last few days?
According to Norcini, it has everything to do with speculators and the bond market.
In the last few days, a huge amount of selling has occurred in the bond market. Ten year rates are at 2.25% and were up 7.4% alone on Wednesday. For the immediate moment, this has caused a rush of investors out of safe havens, two of the biggest being the bond market and the gold market.
Norcini explains that “…speculators are moving out of low-yielding Treasuries (cash) and into equities in the hopes of securing greater returns on their capital.” He says these investors are chasing immediate yields and not “safety.”
Being that gold doesn’t pay any yields or income unless you totally sell, these speculators are “…convinced that the equity markets will.”
As you can see from this chart on the Dow, Nasdaq and S&P, the last few days have been extraordinarily well for the stock market.
Dow Jones Industrial Average Chart by YCharts
Also according to charts from Norcini, gold does have the potential to dip quickly to $1620, which will be a major buy signal, especially for central banks. Norcini though is confident the speculative positions have been flushed out of the market.
Silver on the other hand fell below a key support level of $32.50 so liquidation has been occurring in that market as well.
In the end, Norcini shares our sentiment that this is another cycle in the same pattern we’ve been seeing for quite some time now and that both gold and silver are still “…in the middle of a spectacular bull market.”
Price dips like these represent a tremendous buying opportunity for both gold bullion and silver coins.
As interest rates set by the Fed and other central banks continue at or near 0, we can expect the gold and silver markets to continue their strong, long-term performance.
