Economy

Peter Schiff believes that the price of gold is falling because investors who jumped on the gold bandwagon years ago are now jumping off and onto the stock market bandwagon. This is a buying opportunity.

"Neither the new round of Keynesian expansion in Japan nor the recent fallout from the Cypriot solvency crisis produced gold rallies. Bears cite these failures as the signs that the bull is dead. The latest warning bell came late last week when the Bank of Cyprus announced that it would be selling its gold reserves in order to raise the cash to pay its debts. Concerns quickly spread that other heavily indebted Mediterranean countries with large gold reserves like Greece, Portugal, Italy and Spain would follow suit. The tidal wave of selling would be expected to be the coup de grace for gold's glory years. While this neat narrative may be sufficient to convince the financial media that an historic shift is underway, wiser minds will see more nuance. "
"While I believe that they may indeed succumb to the temptation, such moves may not be disruptive, or even negative for gold. Large divestitures by some countries may lead to corresponding accumulations cash rich, but gold poor, creditor nations like India, China, Russia, and Indonesia. Such transactions would likely take place through private, direct, and tightly communicated sales. As a result, they would be far less disruptive than would be the case were they to occur in relatively thinly traded public markets as many now fear.
Such a transfer in gold holdings would be the logical result of the drift of the global economy over the past half century. Despite its current disfavor, gold is real wealth. Governments and bankers know this. As the emerging economies gain wealth, and the developed countries dissipate wealth through welfare-state debt accumulation, it is inevitable that the gold follows. It's not a question of if, but when."

It sounds like it's already being disruptive.

Man who sold puts on gold the day before it crashed claims the market was manipulated, driving prices down so big investors could buy at a lower price.

"Now that they have done so, let’s consider why – what is their motive? There has been a big drawdown in physical gold warehouse stocks at the Comex this year, and a really dramatic drawdown at the J P Morgan Chase depository. If, as a result of this, stocks are too low to meet deliveries, gold would have to be bought in the open market, driving prices sharply higher, and they for sure don’t want that now that their stocks are so low. So the game is to smash the gold price so that they can replenish their stocks on the cheap – and they are not short of friends in high places who can assist them in this endeavor.
The first “smoke signal” came over a week ago with some members of the Fed purported making rumbling noises about reining in QE, as reported in the latest Minutes. That served to get the gold market nervous. Then there were widely circulated reports last week about the “tiny island”, Cyprus, having to sell 400 million euros worth of gold on to the market – not bad for a “tiny island” - which, although unfounded, depressed and weakened gold further."
"Finally, just by coincidence you understand, after waves of selling in New York during the day on Friday had softened gold up nicely and brought it down close to its critical support, the London physical market locked up on Friday afternoon. Some investors entertain the romantic notion that this physical market is like an old fashioned cattle auction, with a guy in a tweed jacket and a hat spouting 200 words a minute of auctioneers jargon. It is not. It is computerized and the computers froze on Friday shutting out would be sellers who then went into blind panic, entering the futures market to hedge or short. This tipped the market into a vertical plunge that completed the job of crashing the key support level. "

Sounds fishy to me.

Another analysis believes the gold market was rigged to fall.