Gold prices have fallen some 23% from a high above $1,800 last fall to a current low of around $1,380.
And it looks like that’s only the beginning.
Charles Sizemore of Sizemore Capital Management points out that a big-time hedge fund manager unwinding his position is partially to blame for the declines — and thinks that until some of the big gold investors unwind their positions, it’s going to be dangerous to dabble in the precious metal.
That big-time investor is John Paulson, who is out $1.5 billion (on paper, of course) thanks to an aggressive bet on gold that went south.
This is a lesson is risk management that all traders should take to heart: When you bet big, things can get painful in a hurry if the market moves the other way.
Listen to what Charles has to say about the current declines and the future outlook for gold prices in 2013.
- The 10 rules of goldbuggery, from Barry Ritholtz. (The Big Picture)
- Why Warren Buffett thinks gold investing is stupid… and why commodity speculation (that’s what gold investing is) can often end in tears. (The Slant)
- Interesting take on miners: At $1,300 some reserves become unprofitable to mine. (Bloomberg)
- If you want to live dangerously, James Brumley offers 3 gold stocks to pick out of the dumpster. (InvestorPlace)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.