Gold at 5-Year Lows; Great Buying Opportunity (Video)

Gold fell to about $1,090 an ounce last night after the biggest single-day decline in its price in two years. It is now hovering around $1,110 an ounce.

Market consensus is that the sharp drop in price was triggered by major selling in the Shanghai gold market by gold speculators. The drop in price is not a product of fundamentals.

In fact, analyst Todd Horowitz told Bloomberg that he believes many investors see this as a major buying opportunity. He points out that from a technical perspective, gold is in very unusual territory when compared to the S&P 500:

It is a hard asset, a commodity, that I think everybody should own in part of their portfolio… I think gold is a hard asset that typically appreciates in value like everything else. If you compare it to the S&P, the S&P is twice as much as gold is now, which is one of the largest discrepancies in history, which means we should see a divergence back into that. Fundamentally, we have seen probably a low point here.”

Highlights from the interview:

“Gold was down almost fifty dollars over night, before rolling back… This would be a classic blow-off bottom where traders and investors alike, to use a technical term, puked out and couldn’t take it anymore. They dumped out of their positions. That’s usually a great sign that you want to see. Buyers will want to step back in, because we have reached almost 5-year lows. I think we’re at a great level. We’re way too wide compared to where the S&P is. The difference between the two is one of the greatest it has been in history… We’ve got all the bad news in that has pushed the prices down, and I can’t imagine there will be any more bad news that would help gold go lower than here…

“It is a hard asset, a commodity, that I think everybody should own in part of their portfolio… I think gold is a hard asset that typically appreciates in value like everything else. If you compare it to the S&P, the S&P is twice as much as gold is now, which is one of the largest discrepancies in history, which means we should see a divergence back into that. Fundamentally, we have seen probably a low point here. There will be some accumulation of gold at these lower prices to help some of these companies out… I think it’s time to want to be a buyer, because it’s a good hard asset to hold…”

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