Why the price of spot gold is moving in the way they are? In an ideal world, should not that in a stock market decline, investors usually invest in gold or other commodities, but due to current market conditions, it seems that investors react somewhat these strange signals. Suggestions?
Couple of theories on what-
1 - government people have spoken, more recently, to go into a sort of Bretton Woods model, it is conceivable that the government could confiscate all U.S. held gold as Rs 1932. In this case, the gold of the United States is almost worth what the government thinks it is worth.
2 - Trading gold as a hedge against inflation is a paradigm that could change if all Fiat currencies are now and not based on a gold standard.
3 - managers of hedge funds that have been their asses kicked and have to sell holdings of gold to meet margin calls
4 - U.S. government policy of "easy money" over the last decade could have led a commodity bubble in gold like all other assets.
However, the market is acting completely stupid lately and I think if you buy the gold held in a foreign company (eg Australia) and not the U.S. or even worse term or subject to the front to counter party risk, you are handsomely rewarded or at least safe from a falling dollar.
Maybe they know something the rest of us are not and perhaps we should start investing in it.
Do we wish we had all the magic crystal ball to tell us what and when to invest.
When the market turmoil, the logic right before the stock market or economy are not applicable.
You can stay focused and take the conservative road. Protect your hard-earned money.
All this happens because of the financial crisis in the world. It seems that the price moves lower in the next two months, so investors are reacting.
Posted on June 4, 2010.
