Melting Gold

Papers in the roadside tell of suffering and greed
Here today, forgot tomorrow
Ooh, here besides the news of holy war and holy need
Ours is just a little sorrowed talk
--Duran Duran

Gold and silver have not been spared from the eye-popping declines currently being witnessed in the commodity space. Interday moves have been huge. In a few sessions, silver has declined from above $17 to under $13.
Whenever daily volatility really cranks up I like to pull up monthly charts for some longer term perspective. Using Street Tracks Gold Shares (GLD) as a bullion proxy, we can see that the recent decline finds gold resting on the uptrend line that began in 2005. A break below this support at $750ish, and technically gold could head towards the earlier, less steep uptrend that marked the initation of the bull trend in 2001. In such a scenario, gold could see $550 or lower.

Kevin Depew and others suspect that gold may see such a retracement. Can't say that I disagree, given my inclination to agree with Pepe on the deflationary mechanism in play. Back in March I sold half my paper metals positions out of respect for the deflationary scenario. Moreover, I have been out of the miners for quite some time after concluding that the economics of the mining business was just too difficult for me to grasp bullishly.

Moving forward, I have no immediate plans to add to my remaining paper gold or silver (i.e., GLD, SLV) positions (retrospectively, of course, I wish I had sold down even more of these positions last spring ;-). However, I do plan to methodically add to my physical bullion holdings. Unlike the paper, which I view purely as a trading vehicle that will be held for sale some day, I regard physical bullion as pure tangible wealth.

As such, I am diverting a fraction of savings each month towards building my physical metals stock, and view lower prices as an opportunity to accumulate ounces at lower cost.

God willing, my physical metal position will never be held for sale. Instead, it will be passed along to future family generations who will, hopefully, pick up wherever I leave off.

positions in gold, silver, GLD, SLV