Market Panic Deepens

October 10, 2008 | By | Reply More

Spot gold rose to nearly $930 an ounce in overnight trading in Asia and has settled at over $920 an ounce in early trading in Europe and the UK.

Yesterday it had been knocked back to $885 an ounce, this poses the question –do these large fluctuations in the price of the world’s safest store of value offer any clues to the outlook for the general stock market? The market panic deepens day by day.

It is significantly that as gold has come off its low of $740 only one month ago, so the stock market turmoil has spread from the banks and financial institutions to every other market sector and now the contagion has reached the emerging markets with devastating effect.

We have no hesitation in calling this a deepening panic as the realisation that the worldwide efforts of governments and central banks are totally misguided, sinks in.

Despite the questionable influence of manipulation by the powers that be in the gold and silver market, the yellow metal is the only profitable play available right now, with silver likely to catch up.

Shorters, of course, are excluded.

As governments rush to the printing presses in a so far vain attempt to stem the haemorrhage it is becoming blindingly obvious that the price to be paid will soon to be colossal inflation as the currencies of the western economies together with many of the emerging nations go into free fall.

The only wonder is why has gold not yet reached and blasted past its high of over $1000 an ounce set just over six months ago when nobody was forecasting that the expected down turn could possibly reach the epic proportions we are now witnessing.

We hazard a guess that it is simply that there is either not that much spare cash around any more or that cash is being hoarded to put back into market bargains when a bottom is perceived.

The investment community has largely ignored the precious metal sector for the last twenty years while other markets offered so many more profit opportunities. As an understandable result there are far fewer analysts, brokers, fund managers and retail investors with an in depth knowledge and experience of the market than for example, the financial or pharmaceutical sectors.

That is changing fast as gold looks like becoming the last chance saloon! We read that two of the wealthiest Russians have between them lost $230 billion on Russia’s stock exchange.

It is of no matter whether this is true, false or an exaggeration, losses of magnitude are being experienced by multi millions throughout the world, whether they are financial institutions and funds, individual investors or Joe Public depending on his pension fund.

The flight to liquidity seems set to continue if yesterday’s performance on Wall Street, followed by Asian markets and this morning in Europe, is any indication. Bottoms have been called so many times in the last few weeks that they can no longer be taken seriously.

In the last two weeks I have never been so inundated with emails from self-styled investment gurus offering to make my fortune because they say that so many trading opportunities have opened up in the prevailing market conditions, but first I have to send them money!

Why do they want my money when they could so easily become billionaires by taking their own advice?

Its just another sign of the times as sharp operators prey on the gullibility of a public seeing their stocks going down the drain and clutching at any straw that might restore their fortunes.

Physical gold in the shape of coin and bars remains in short supply and, when available, expect to pay a considerable premium above the spot price of the content.

The easiest exposure to trading gold is Streetracks Gold ETF (NYSE-GLD) or other gold or silver ETF that holds the physical metal or directly purchasing on line the physical metal, in amounts as small as a gram or fraction of an ounce, at BullionVault. com

In these troubled times we can think of no better home for your money than the safe haven of gold. Even after thousands of years it remains the one recognised store of value by people of all nationalities and creeds. Just to clarify we have changed our stance on buying into gold and silver miners.

Both major and junior producers are seriously out of favour and will likely stay that way until the stock markets settle down. There will be exceptions with some discriminating M & A activity taking place but producers will take some time to catch up with the bullish gold and silver activity that can be expected in the next twelve months.

Making the right picks for shorter term profits is likely to prove frustrating. Our advice is to stay calm and avoid the panic by buying gold.    

           

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