questionswhat made the gold market drop like a lead bar…


I am not an expert by any means, but I would venture a guess.
First it was a bubble that burst. (Duh)
Why the bubble?

*Normal investors use gold as an anti dollar (the US dollar is no longer based on gold). The idea is gold will get stronger when the dollar is weak. Stock market was weak gold was invested in.

*Consumer investors were inundated by commercials to buy gold. The value was on a natural rise so it seemed like a good idea. They bought gold increasing the value at a greater artificial rate.

*Consumer investors and normal investors saw the artificial (most likely not know artificial by the consumer investors) so they increased investments further increasing the artificial rise.

*The normal investors ready to get back into the stock market, because the stock market has recovered, quickly got out of the gold market lowering the value. A small correction.

*Consumer investors seeing the drop in gold stopped believing the commercials and increased the correction.


Out of space from above.

Moral of the story consumer investors should stay away from the stock market. We loose when it came to housing, we loose when in gold, and we loose in stocks.

No I do not watch Cramer, or watch or read any financial media.


@caffeine_dude: Pretty good summation that gold is oversold to investors that are fickle. But We are just about to enter the recovery phase according to some spin doctors and if that is the case then Inflation will take effect making anything not dependent on the dollar a good investment. Gold is traditionally one of these investments and should not be falling in price.


Bubble created by incessant advertising by schemers and scammers. The only people worse than those pimping gold are those that pump and dump penny stocks.


@zuiquan: You are right but there is going to be a lot of excitement when the artificially low interest rates go away.


I did not expect @justanotherwoottroll's pictures to go away. They were off topic but not offensive. I live in an area that has gold in the ground and I am seriously considering looking for some in the local streams.


@mybestuser1: Yeah, his name should tell you why his stuff always disappears. He comes in, acts the fool, and gets his stuff deleted. As it should be.


@mybestuser1: Uh, no. I only have one account here. Besides, I hate hate hate that crap art he puts up. It looks like some five year old's idea of spiderman.


@zuiquan: No argument, I tattled my golden spiderman Myself to get rid of it since without the other crappy spider man pictures it did not fit in.


do the opposite of what the crowd is doing and your investments will do better than if you follow the crowd. When everyone was panicking and getting out of stocks over the last 6 years, my wife and I increased our investments into our Roth IRAs and have seen our money approximately double since 2008. When gold hit 1,700 and everyone was saying to buy, we sold what little we had. By the time the media and general public are talking about "great investments", the time to get in is OVER. It takes a strong backbone to stay in when everyone is panicking, but over the long term it's always worked out.

To answer your original question: It was overpriced, and this always happens after a run-up. Real estate, like gold, was seeing massive speculation that led to the crash 5 years ago, and just like gold, real estate is a tangible commodity, but was still susceptible to a "bubble" effect. The ability to make short term gains and lock them in is limited to a very few people, and based on luck.


What has been said it why the bubble needed to come down but specificaly their are ties to the gold trade out of south africa and how they are limiting mining and exporting; that is what sparked the burst.


Planet money did a pretty good job covering (and predicting) the gold bubble:


The underlying issue is that markets are composed of people. When you hear about an economic depression, you think that it's X....when you think of someone who is clinically depressed, you think it's Y.....but there is more in common between X and Y than you'll get from all the graphs and charts and analyses and opinions.

People generally want two things in their lives: comfort and entertainment; they also want to do two things in their economic lives: keep what they have amassed and make a profit. During depression, people almost shun the latter alternative and start getting worried about the first. If you have no hope of being entertained, or of making a profit, you are depressed.

Over the last few years, the government -- which is roughly 30% of the economy -- has run deficits of roughly 40%. In the meantime, we've been seeing GDP (which includes government spending) growth rates of 1-3% In other words, we've borrowed 12% of GDP to be 2% to the good. We're in a depression.


@icthulhu: We haven't even been in a recession for years, let alone a depression.


There are "signs" being reported that the economy is getting better, so people are moving their money from gold back to stock, bonds, and other forms of investments.


It was bound to happen. Gold had become inflated due to people buying it as a hedge to inflation. Lately the Federal Reserve has been printing new money to buy debt from banks (typically bad debt) to get money into the hands of banks to get money into the hands of people in the form of new debt. This printing of money should have caused inflation (through dilution), but those that own our debt (China being a large one, but many countries also own Tbills) don't want the value of those to drop, so they start printing money as well. This causes no real change to inflation (which has for all intents and purposes been zero). Gold was bought to hedge inflation that never occurred thus causing part of the bubble. The bubble was popped when helicopter Ben said in the last press release that the Fed was going to cut back QE (the purchasing of debt with new money) and would be out of that game by 2014. The jig was up and the gold bubble popped. That's what happened in a very loose nutshell.