Gold - An Interesting Week to Miss

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What we are seeing, particularly in the gold market, is a degree of volatility seldom seen before. Big moves in the price can occur extremely rapidly, both on the up and on the down trends, and most of these are dollar driven defining gold's primary position as a definer of dollar strength and weakness.

What a difference a week can make...As those who were not stuck without good internet or news access will well know, gold plunged back to its lowest levels since early February with most of the fall taking place on April 1st - April Fool's Day! The question is who will be the fools - those that rushed in and bought on the fall, or those who liquidated holdings in fear that a 1980 type plunge was again imminent?

At the moment, it certainly looks like those who sold at that level may be regretting their decisions. The plunge was largely on signs of dollar strength, although these have proved to be shortlived with new economic data pointing to further rate cuts and weakness still in the pipeline. The R word is now openly spoken in the US, although expectations are that although a recession may technically be in place that it is likely to be shallow, if not particularly short - and there is little doubt that because of the size of the US economy and its effects on its main trading partners there will be repercussions around the world. Japan is very much feeling the squeeze already for example and some European economies are decidedly more shaky than they were a few months ago.

The subprime crisis certainly has further to run - although the strength in the Chinese and Indian domestic economies has taken the heat out of what is happening in the West and commodities in general have been remarkably resilient.

What we are seeing, particularly in the gold market, is a degree of volatility seldom seen before. Big moves in the price can occur extremely rapidly, both on the up and on the down trends, and most of these are dollar driven defining gold's primary position as a definer of dollar strength and weakness.

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