As the equities market gyrates, gold bugs are getting their vindication. Better late then never, I suppose.
It is pretty clear where the folks selling their share of the equities market yesterday put their cash. As investors look for a safe haven, the gold market is booming today.
Gold prices settled today at $978.50 per ounce, an increase of $22.20 from yesterday’s final figure. The action is a surefire sign that investors are getting nervous.
It was almost a year ago when the precious metal entered one of its most volatile periods. Over the span of several months, gold prices ran from $800 to $900, back down to $700 and then the whole back to the $1,000 mark and beyond.
As more and more analysts and investors claim the equities market is topped out, plenty of folks are beginning to wonder if we are in for another volatile autumn.
While a repeat of last year’s near-collapse is highly unlikely, investors are once again wondering about the health of the nation’s banks and what the economic future holds if unemployment remains high and grow stays stubbornly slow.
Ready for a repeat?
It’s the banking sector that holds the key to the gold industry’s short-term future. As shares of the companies deemed “too big to fail” by the American government dropped yesterday, investors in all sectors ran for the exits.
After a 45% surge from March’s lows, investors are locking in their profits and waiting for the inevitable correction to take place.
It is great news for gold investors and even better news for a handful of other metals.
Silver is getting plenty of attention these days. And why shouldn’t it? The economically important metal has surged by nearly 20% over the past few couple of months.
Of course silver is not the only metal surging in value. Palladium, which is used extensively in the auto-making business, got an added boost from the Cash-for-Clunkers program. Its price has risen by more than 30% since mid-July.
If we are seeing such drastic swings while the value of the dollar remains fairly static, imagine what will happen as global interests rates begin to fluctuate and money pours into countries other than ours.
It won’t be pretty.
With just a couple more days of high-volatility and bearish trading, the gold bugs that predicted a run through the $1,000 level will get their vindication.
Better late then never, I suppose.
If you want to read more about the commodities market and what China is doing to protect itself from a downturn in the American dollar, read my latest report here.
