Contrarian Alert!...Gold & Precious Metals have become the Rodney Dangerfield asset class...They Get No Respect!...Excellent Time to Dollar Cost Average into your Favorite Precious Metals Fund

Gold rout could turn into stampede out of commodity investment

World's largest mining companies are running out of options as commodities slump tipped to deepen

During the boom years of the commodities super-cycle, when iron ore traded at $180 per tonne, gold topped out at more than $1,900 per ounce and oil looked cheap at $100 per barrel, no bet on resources was too risky to take. China’s demand for raw materials, energy and food was expected to drive growth in the entire commodities sector uninterrupted for at least the next 25 years. 

However, those days are over; and despite glimmers of hope that the current slowdown in Chinese economic growth may be short-lived, the crash in resource-based asset prices has turned from an orderly exit into a stampede. This sense of nervous panic is partly why gold prices tumbled so fast on Monday, only for them to recover their losses in the following days. 

During the commodities super-cycle mining investments were easy. All resources were then viewed by investors to be equally likely to benefit from China’s remarkable economic transformation. However, in the current environment it has grown harder to identify the assets which mining companies covert the most, ones with long-term demand profiles that can be developed cheaply.

Hedge Funds Are Holding First-Ever Gold Net-Short Position

Hedge funds are holding the first ever bet on a decline in gold prices since the U.S. government started collecting the data in 2006.

Goldman Sachs Group Inc.’s Jeffrey Currie says the worst is yet to come for gold, and that prices could fall below $1,000 an ounce for the first time since 2009. “The risks are clearly skewed to the downside,” Currie, the bank’s New York-based head of commodities research, said in a phone interview Tuesday.

DYI Comments:  Gold peaked at $1921.50 on September 6, 2011 and as of Friday traded at $1098.20 for a 43% decline.  Not to be outdone your highly volatile precious metals mining funds are off from peak to trough around 70% to 85%.  An excellent time to re-balance or dollar cost average as these companies are simply cheap in relation to their respective sales, earnings, and dividends.  They represent excellent value.  Please note they could get cheaper due to their highly volatile nature but a lessor price would only encourage me to purchase more.

DYI