Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Why Gold Price Can Still Go Down

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

By: Mac_Slavo


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

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 .

© 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 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


07 Dec 09, 04:56


Post Comment

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

6 Critical Money Making Rules