Gold Up Sharply as Bear Market Rally Fades

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". . .precious metals clearly established their position as the place to be. . ."

Gold finished the week up 5.1% at $913 while silver jumped 8.4% to $12.90 as precious metals became a safe haven from the faltering six-week old bear market rally.

This left gold prices at their highest levels for three weeks but fell short of a third break of the $1,000 barrier. However, the precious metals clearly established their position as the place to be as the bear market rally breaks down.

Now showing a precocious 28% gain in six weeks the stock market rally is facing strong headwinds in the upcoming bankruptcy of two top U.S. auto companies, a commercial property slump, a deteriorating international financial environment, and general over-optimism about recovery prospects in the banking sector.

The U.S. banking sector has a long and painful recovery path to come but most crucially has not hit the bottom yet. Ask Meredith Whitney, the analyst that first downgraded Citi at the start of the crisis.

And what about the executives at Chrysler and General Motors who are busy preparing to file for bankruptcy? This is a sign that things are still getting worse, not better.

Global trade is also firmly in a slump. Japanese exports in March slumped by 47% instead of 49%, and if that is an improvement worth shouting about then this correspondent is from Mars!

Reality will bring investors back to the conclusion that with the money supply being inflated by an unprecedented amount the only safe havens are precious metals, and that is what we started to see last week.

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