The reason why commodities prices drop is simple, when good times are here, demand for commodities increase. More computers, electronics and other products requiring commodities like gold, silver and rare earth minerals are being manufactured, because the economy is in a growth stage more products are being sold to consumers and corporations.
However, if a recession is coming then the opposite happens, if everyone in the world is going to cut back on purchases of these goods then the demand for commodities like gold, silver and rare earth minerals will go down and that is why the mining stocks will fall.
The gold price itself (not mining stocks) may go down as well. However, if a currency is going to collapse…let’s say the U.S dollar from too much dilution (money printing) then it is possible that gold and silver prices might correct but then go back up. The reason, is because gold and silver also has a tangible intrinsic value that makes it ideal to be used as currency. This goes back thousands of years, just do some research into history.
I will be picking up some physical gold, waiting for the price to fall a bit more.
Click on the link to read article on the recent drop in mining stocks: http://www.theglobeandmail.com/globe-investor/mining-stocks-slammed-in-market-rout/article2176062/
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