Gold — and not only gold — takes a powder
At the start of this year, the mavens at Goldman Sachs — who had called the price movement of gold quite closely in 2014 — predicted it would finish 2015 as low as $1200 an ounce.
Maybe it will, but already in July it is plunging near $1,100. We think it is fair to say that no one foresaw this. Certainly at our little pawn shop, we didn’t.
But it isn’t only gold. Bloomberg News reports that world commodity prices have fallen to levels last seen in 2002. Gold, by contrast, has fallen to 2010 levels.
Raw materials are losing favor with investors as the dollar gains amid signals from Federal Reserve Chair Janet Yellen that the central bank may raise rates this year on the back of an improving U.S. economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn’t pay interest or give returns like assets including bonds and equities.
The other commodities include things like iron, natural gas, oil and wheat. At Kamaaina Loan And Cash for Gold, we like to say we will buy (or make a loan on) “anything that doesn’t eat. But we don’t buy (or lend on) oil or wheat. And for that, just now, we are thankful.