Why the Gold Sell-Off is Unlikely to Last

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I can understand gold stocks being temporarily dragged down with the broader market, but all of the money that comes out of blue chip, and tech stocks will need a new home, and a portion of this will eventually move towards gold and energy.

It must have really had the central bankers squirming in their seats to see gold break through resistance and head back towards $700. The HUI also shot through resistance at 360, and moved above 370 briefly. Tuesday's pullback made some sense, as the dollar bounced off support at 80. But Thursday's $15 drop in gold, and 5% decline in the HUI index just plain stinks of manipulation.

This sell-off took place concurrently with a declining U.S. dollar and rising crude oil price, although crude later followed gold's lead, and declined. The overall market decline could be contributing to the sell-off in mining shares, as the Dow fell nearly 3% on Thursday. The market is surely due for a serious correction, and may slip into recession before the end of 2007, as predicted by a host of investors including George Soros.

I can understand gold stocks being temporarily dragged down with the broader market, but all of the money that comes out of blue chip, and tech stocks will need a new home, and a portion of this will eventually move towards gold and energy. Not to mention that gold has historically been viewed as a safe-haven investment in times of economic uncertainty. And while America has been riding high due to the housing market, easy credit and a print-friendly Fed, the day of reckoning is fast approaching.

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