Gold Slips | Is It Time To Buy The Dips

February 10, 2009 | By | Reply More

Gold slipped below $900 an ounce yesterday, falling as low as $892 an ounce during trading as investors took the chance to cash in on profits made from the recent rise.

We don’t think that this is a signal to “back up the truck” it is just that gold sector players are very twitchy in these most volatile times, particularly with the uncertainty that the Obama bail out plan will prove sufficient to prevent economic catastrophe from becoming a reality.

It is not that we are becoming doom mongers but in the publicly announced words of a leading British government minister, it will be the worst slump in 100 years, even worse than in the thirties!

A previous aide to the Governor of the Bank of England has stated that the presses will have to churn out the pounds to pay for the money being thrown at banks, and all the other claimants for government cash to help keep the good ship SS Britain and its crew afloat.

Some cynics might suggest that this is just a despairing effort for a short-term solution in the hope that it will prevent a total wipe out for the incumbent Labour government at the elections that must be called in less than eighteen months.

Britons of a certain age will remember the last time a Labour government held office resulted in the IMF having to bail out the country and consigned the socialists to the political wilderness for over ten tears.

Led by an even more intellectually challenged Prime Minister than previous socialist incumbents of the office, the writing is firmly on the wall.

President Obama and his predecessor led the way with massive handouts to banks, mortgage lenders, et al. and doubtless this will be a continuing pattern until supply and demand basics reassert themselves.

At least the President does not have the problem of an imminent election to win, but to the impartial observer he has shown that “he can talk the talk” but it remains to be seen whether he can “walk the walk”.

One thing is an absolute certainty, just as in Britain, Europe, Australia and others those printing presses will be working full time. End result can only be high inflation, the dollar in your pocket will buy less and less in the course of time, just as it has done for past decades only this time at a rapidly accelerating pace.

Don’t let the prospect of deflation lull you into a false sense of security, it will only be a temporary phase that will not hold back the march of higher prices across the spectrum of essential goods and services for very long.

To exacerbate the situation, can anybody seriously believe that the Chinese, and other major US currency and bond holders, are going to sit back and take no action as they see the value of their holdings sink into the quagmire, particularly as the new administration, in the person of Mr Timothy Geithner, secretary of the US Treasury, has got off on the wrong foot by accusing the Chinese of currency manipulation.

It seems to us that this slip in the price of gold below $900 an ounce is a buying opportunity. As the saying goes (with our own amendment) “buy the dips and hold your nerve”

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