Gold - the Innocent Bystander to the Hurricane

Source:

Jeffrey Nichols, American Precious Metals Advisors: "The yellow metal's own positive fundamentals - and even its role as a safe haven in turbulent financial seas - have simply been overwhelmed by the massive storm-surge flight to cash and the indiscriminate selling of securities and commodities, selling that has been amplified and accelerated by automatic program trading, short covering, and technical triggers on the way down."

Gold is still lingering around the $780 mark, but many analysts predict that this will not continue with fundamentals set to drive prices higher once the current financial meltdown steadies - although how long this will take is the major uncertainty.

I am indebted to Jeffrey Nichols of American Precious Metals Advisors for the following quote: "...gold's swift descent in the past few weeks is a direct consequence of the unfolding global credit crisis. In short, gold has been an innocent bystander to the financial hurricane hitting Wall Street and global markets"...

Overall though there does seem to be a major dichotomy in the way gold has been behaving. The past few weeks have seen enormous physical demand reported as some 300 percent above the same time last year in some traditional gold trading areas, yet the metal price has remained weak, well below the $800 level.

Nichols puts this as follows: "The yellow metal's own positive fundamentals - and even its role as a safe haven in turbulent financial seas - have simply been overwhelmed by the massive storm-surge flight to cash and the indiscriminate selling of securities and commodities, selling that has been amplified and accelerated by automatic program trading, short covering, and technical triggers on the way down."...

Nichols comments: "Long-term price prospects remain as bright as ever -- and nothing in the recent market performance has changed our forecast of record high prices in the next few years: We still expect to see gold back over $1,000, if not late this year, then almost certainly in the first quarter of 2009...

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