Gold Drops To $929, Is This Just The Summer Doldrums?

June 22, 2009 | By | 1 Reply More

Spot gold dropped sharply to $929 an ounce for a very brief period in European mid morning trading today before recovering to $930 but was still down $4.00 from the open.

Last week saw a drop of just over 0.4% for the period with silver leading the way down with a fall of 4.5%.

The question facing gold and silver market players is whether the last two weeks of gold trading in the $930-$940 range is simply a continuation of the metals historical summer doldrums or are there other factors that may be detrimental to the continuance of the long term bull trend that originated in 2005.

As has often been stated on this site and by many other observers, it is in the interests of the Fed and the bankers ‘mafia’ to downplay the merits of gold as a store of real wealth in this modern era of near worthless fiat paper money backed by nothing more than the reputation of the country that prints the junk and its ruling politicos.

If we could have the confidence in our elected governments that they had the integrity to put their country’s interests before their own and that they and their advisors were immune to the blandishments of the bankers, businesses and lobbyists screaming, scheming and outright bribery, then those mountains of paper money might have some value after all.

It is then hardly surprising that government apparatchiks and their acolytes in the media have geared up their efforts to undermine the virtues of gold in the last few weeks in order to prop up the dollar as Obama and his troops make no effort to curtail their spending habits.

In reality it seems that hardly a day goes by without revealing further plans to add to the money supply coupled with vague promises that when the time comes they will be able to claw back the cash in order to avoid hyper inflation.

If Americans think that this article is an exaggeration of the mendacity of politicians we give you the example of the British members of parliament. With few exceptions it has been revealed that MPs of all parties have had their noses in the expenses trough at the expense of the already over taxed British public.

Claims have been accepted and paid without exception for such essentials as ‘moat clearing’ ‘adult movies’ ‘a duck house on a pond’ flipping houses and apartments without paying capital gains tax and being redecorated just prior to a sale’.

Can you believe that a British politician actually had the audacity, not to mention lack of personal honour, to claim five pounds back for a donation he gave to a charity?

Despite the British ruling Labour party’s efforts to put a lid on this disgrace, a national newspaper has made detailed revelations of the obscenities conducted by politicians of all parties.

Would that the even worse expenses extravaganza of the useless European so called parliament could be revealed for public consumption where even the auditors have refused to sign off the accounts for years!

We are not familiar with the situation in the US but it is hard to believe that there are many exceptions to the politicians universal golden rule of putting self interest as their first and foremost priority.

If you are wondering what this diatribe has to do with the outlook for gold and silver then this is the point we are trying to make. Be very, very aware that many information providers, that is government sources, the bankers mafia, and media types that do not want to jeopardise their access to top government officials, will spout the party line as instructed regardless of the truthfulness of the content.

We only have to look at the examples of the official statistics that are regularly announced but seem to bear no resemblance to reality to realise that they have probably been ‘massaged’ to hide the gruesome truth.

It is for this reason that we look at the ‘green shoots of recovery’ with a sceptical eye. It is a reasonable assumption that, for the time being at least, the recession/depression is slowing but that does not mean that economies will stop contracting, that unemployment will not continue to rise albeit a little slower, that business and personal bankruptcies may have peaked but may have certainly only slowed a little.

Whether gold and silver will continue their long term bull run remains to be seen in the meantime we proffer this well known piece of investment advice “the trend is your friend”.

Betting against the trend more often than not results in losses, the trick is identifying the trend according to your risk appetite. It may be in the short term the market will be profitable to buyers of GLD or SLV put options or just simply selling short, for the long term buy and hold investor then this may be bargain time.

Perhaps investing in the currencies of the BRIC nations or those countries with large oil or mineral reserves, such as Canada or Australia, may produce greater long term rewards and prove less stressful.

We believe that it is a wise move to tuck away 10%-15% of your long term portfolio in silver and gold, whether in the physical metals (not coin unless you know the market) or an ETF such as SPDR Gold Trust (GLD) or iShares Silver Trust (SLV).

Just a last thought, silver is a more volatile market than gold, the last few days have seen the gold/silver ratio creep back to well over 65. If, or hopefully when, gold resumes its upward path, silver will outperform the yellow stuff by a considerable percentage so keep an eye open for an opportunity to profit.

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