The Psychology Of The Gold Investor

January 21, 2008 | By | Reply More

The first thing that strikes us when rounding up on the action in gold last week is the psychological factor that determined investor reactions to the daily ration of bad economic news emanating from the US, UK and Europe.

Despite the logical conclusion held by so many market gurus that weakening currencies, banking crises, retail sales tanking, etc. etc. can only favor gold but the fact remains that the price dropped to the $870´s and, in Europe this morning, has traded as low as $871.70 an ounce.

Last week we took our own advice and topped up on our gold holdings by adding to our favorite vehicle, Street Tracks Gold .

However as the markets developed we decided to hold some money in reserve and maybe, just maybe, a window of opportunity to add further will occur at the $850 level.

If the gold price goes lower than that in the course of the next 2-3 weeks then we will just have to be very patient and grit our teeth. Investor sentiment has shown us how very volatile it can be in the short term and there is little doubt that this turn to extreme pessimism is having its effect on the yellow metal and defying logic.

Whatever the near future holds we are still optimistic that the precious metals bull run has a lot further to go this year with gold, as usual, leading the advance.

In the meantime we should draw your attention to some recent news.

India is a major market for gold jewelry and is a major importer. No wedding is complete without the giving of gold, usually in the form of jewelry, to the happy couple

Reports are coming in that the Indian market for gold is drying up due to the high price, no mention of the fact that the Indian wedding season is over!

Also we keep seeing news articles about the difficulties being encountered by the mining industry worldwide. Industrial and safety problems in South Africa, problems with mining permits in Australia, US, Canada, and political uncertainties in most of the rest of Africa and parts of South America.

Talk about downbeat!

There is good news out there, new exploitable deposits of gold, silver, PGMs, base metals and most important, Uranium, are constantly being discovered as the current high price of these commodities encourages exploration and development.

On a final note for this weeks round up we note that Gordon Brown, the UK´s prime minister has added to his reputation of not being the sharpest tool in the box.

This man enhanced his reputation for idiocy in the 90´s by announcing in advance that he would be selling off 400 tons the UK´s gold reserves and then wondered why he achieved this at the lowest price in twenty years.

Today he hit the headlines by announcing that he wants the IMF to come to the aid of crises like the present global credit crunch. The FTSE has unsurprisingly started the day 200 plus points down.

Talk about adding fuel to the flames! What have the Brits done to deserve one carpetbagger to be succeeded by such a gullible financial ignoramus?

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