Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19
Phase 1 of Stock Market Correction - 11th Mar 19
Long Awaited Stock Market Pullback has Finally Arrived - 11th Mar 19
US Presidential Cycle and the Stock Market - Video - 11th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - 11th Mar 19
Chinese Economic Data Shakes the Global Stock Markets - 11th Mar 19
The Fed Is Playing a Dangerous Game - 11th Mar 19
The Stock Market Has Called the Fed’s Bluff, What’s Next? - 11th Mar 19
Turkey Holiday Bazaar Extreme Jewelry Price Haggling - Fethiye Market - 11th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Why Gold Price Can Still Go Down

Commodities / Gold & Silver 2009 Nov 27, 2009 - 09:23 AM GMT

By: Mac_Slavo

Commodities

Best Financial Markets Analysis ArticleThe city-state of Dubai announced yesterday that they would not be able to pay the interest on their debt. Dubai, you may remember, saw explosive growth in real estate from 2001 to 2007, but when Real Estate Bubble Wave 1 popped, thousands of investors and residents fled the Middle East state amid collapsing housing and commercial real estate prices.


From the UK Times Online:

Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill.

Shares plunged, weak currencies were battered and more than £14 billion was wiped from the value of British banks on fears that they would be left nursing new losses.

Though there was not much action in global stock markets on Turkey Day, as soon as markets opened this morning, stock sell offs around the world began. The Japanese stock market dropped 3.2% (-301.72), Hong Kong fell 4.84% (-1,075.91), but Europe managed to stay in positive territory for the time being.

US Stock markets opened to the down-side, with the Dow being off 180.19 (1.71%) points in early trading.

The most interesting asset class today is gold, which was trading down $27.60 (2.33%) at $1159 in early trading. Why is this interesting? If gold is supposed to be a safe-haven asset, shouldn’t it be rising during times of crisis?

This down move in gold suggests that, while the long-term trend may be in the up direction, the near-term movements of gold are still closely tied to the dollar. If we were to see investors flee equities and foreign currencies in favor of the dollar, as we are seeing on a limited basis today, then not only would stock markets come crashing down, but gold would follow suit.

The Dubai credit delinquency may be a small blip on the financial collapse radar screen, but given today’s action, it can be used to help forecast possible asset class movements in the event of a major stock market collapse.

For those gold bugs who are looking for a better price before moving more wealth into the precious metals classes, there is still hope, it seems.

Contrary to popular opinion, gold may not yet have become the last, safest asset on Earth. Investors may have simply been speculating on the price of gold moving up. For some, it may have been an inflation hedge, but according to the government’s CPI numbers, there is nominal inflation. And, if gold was really a safehaven asset now, then it should have been moving up, not down, on today’s Dubai news.

So, for the time being, we’ll side with those, like Marc Faber,  who believe gold still has the potential to go under the $1000 mark, even as low as $800 - $900. This scenario may not be the likeliest, but it is still a possibility. Keep in mind that we have seen gold go from $1000, down to $700 in the last 18 months. Who’s to say it can’t happen again?

That being said, we are not selling any of our existing gold positions, simply because the long-term trend is the important one to be looking at. Gold will continue to edge higher over the coming years, not because of speculation or inflation fears, but because it will act as a hedge against government instability and incompetence, as it has done for thousands of years.

If you are trading and trying to make a quick buck, don’t get upset if gold surprises to the down-side in the near-term. For long term investors, gold is a safe haven asset, so hold strong - it’ll pay off in the long run.

UPDATE 11-27-09, 9:45 AM CST:

For further analysis of the market machinations behind the down-ward gold and stock market moves, we recommend Karl Denninger’s article A Sober Reminder on Black Friday:

I will repeat what I have said since the breakout at 1060 on the gold futures - there is no safe place to buy during a parabolic move.  Yes, today, we stand having lost “only” the last three days of gains.  So far.  Better think about how you’re going to hedge off the next $300 of downside move - if it comes.  No, that’s not a prediction - but the last two days are a warning that it both can and might.

—-

We are fortunate that this is a “little country” with a “relatively small” impact, even if they truly default and cornhole everyone with exposure.  Total exposure is claimed to be somewhere around $60 billion - enough to hurt, but not enough to kill.

The dollar carry unwind, along with the other possible disaster scenarios, does not appear to have been triggered by this little adventure - yet.

This should not - and indeed must not, be taken by market participants as a “whew, it’s all ok” sort of signal.

This may instead be the last warning we get.  The potential for contagion does exist in this situation, and with the markets floating not on fundamental values but rather on Fed-created games and distortions.  This in turn has encouraged people to lever up, which means that we are once again exposed to a potential margin call tsunami that circles the globe and takes down all asset classes at once in an uncontrolled unwind.

If the SHTF in financial markets, look out below, as US Dollar cash will become an instant, albeit short-term, flight-to-quality-asset.

By Mac Slavo

http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com .

© 2009 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments


07 Dec 09, 04:56
Gold

GOLD MUST GO DOWN !


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules