Why Is Gold Getting Dumped?

February 24, 2009 | By | Reply More

This article will be short and to the point. Gold is getting dumped and we have to work out why.

Is it a portent to further falls or is it just a robust correction?

We do not know the answer but here are a few suggestions that we are reluctant to call educated guesses.

In Asia and Europe there are signs that investors, fund managers, et al, are getting seriously worried as banks rack up more problems.

In the ‘Old World’ banks have traditionally been considered as the epitome of conservative fiscal management, branch managers were acknowledged leaders of their local communities, handing out advice to small businesses, would-be mortgage applicants etc. on an impartial but caring basis.

Now banks and their employees have lost public confidence and are treated almost as pariahs.

Confidence in all things financial is evaporating.

On the other hand in the ‘New World’ banks and other financial institutions long ago lost their street ‘cred’. Right now Europe and Asia are calling the gold tune and fear in every market has become rampant!

Gold and precious metals, despite their flight to new highs have suddenly become infected along with every other market with this fear.

Because gold and silver have been the only positive investments in a world of falling market values, it is only to be expected that a spill over in fear will cause a correction.

Add to this the natural reaction of speculators and investors, not the scalpers and very short term players, to cash out their gains as they watch the charts take a tumble and here we are back to $965 an ounce!

What next you may well ask?

Will this fear reaction spread or will it be contained?

We can only guess but in our case we will watch the ten-minute chart and when we see a steady climb back from the $965 level to near $968 or thereabouts we will take that as a signal to buy. Remember buy the dips sell the peaks and just maybe that is just what speculators, hedge funds and Joe the plumber is doing.

Isn’t it interesting that just when so many technical analysts are telling us that the charts are telling them the sky is the limit for gold, the price collapses! Put not your faith in fortune tellers-look at the facts!

To add what may be fuel to the fire it is reported that Indians are no longer major buyers of gold even in the wedding season and are in fact selling off old and damaged items of gold jewelry in the belief that the gold price is too high.

Yeah, but do not forget two things. Indians are suffering from the effects of the global recession as much as anybody, particularly the newly rich middle classes and the gold backed ETFs now hold record amounts of physical metal.

A temporary setback this may be but be very careful not to miss out on any gold rush!

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