If you want a really good picture of what has been going on this week, overlay the gold market activity with that of equities.
Posted by Adam King on August 12, 2011
Gold need not be a shelter only for the rich.
August 12, 2011 – If you want a really good picture of what has been going on this week, overlay the gold market activity with that of equities. For the first time in its history the stock market saw four consecutive days of 400 + swings – a truly stunning display of investor panic. Gold, on the other hand, despite concerted efforts to reel it in – including a 22% increase in margin requirements – relentlessly surged upward.
Today the gold price confronted perhaps the strongest resistance of the week, and it was beginning to look like the opposing forces would succeed in pushing the price below $1700. But then, as it happened all this week, resistance collapsed well short of that mark. Clearly a momentous change in sentiment is under way.
The extreme volatility in equities raises an enormous red flag that investors just can’t ignore. True to form a great number were like horses running back into a burning barn, buying Treasuries because that is the only haven they have ever known. Others took cover in the Swiss franc, only to be unceremoniously ushered right back out into the tempest. But a great many had the presence of mind to pause and reevaluate their thoughts on the safest place to hide, and they had a mass epiphany.
Once the moment passes, what every epiphany reveals seems absurdly obvious. All that you seek from shelter is to be able to emerge unscathed after the storm has passed. Nothing else matters. For that even a cave on the hillside is far superior to a lavish mansion that gets swept away by the floodwaters. So what if gold just sits there, protecting your wealth. That is what gold does, and because that is all it does, it is far better at it than any other investment.
Still, things have to get pretty bad before investors head for cover en masse, and that is the real force driving up the price of gold. I believe that the world is just beginning to come out of denial and from here on awareness of the true nature and depth of the fiscal crisis will grow exponentially.
For many – especially those with the most limited resources – the realization will come to late. But gold need not be a shelter only for the rich. All that gold investment requires is a strong commitment, clear priorities, and the willingness to sacrifice today’s wants for tomorrow’s needs.
Senior Staff Writer – Certified Gold Exchange
US Gold Market