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Monday, October 13, 2008

Gold Falls as Illusion of Safety Permeates Investors

The attempted government bailouts around the world, along with announcements by major economic powers that they are going to prop up the failed global banking systems, has many investors seeing stars, while bringing the illusion of safety.

Those factors are keeping gold from moving upward over the last several days, and is putting downward pressure on the metal instead.

December delivery for gold dropped $16.50 to end the session at $842.50 an ounce on the Comex division of the New York Mercantile Exchange. This is the third straight trading day gold has fallen.

In an unprecedented move, some major central banks announced they'll be working together with the Federal Reserve to offer auctions for unlimited U.S. dollar funds. In the past the funds were capped. This is an attempt to ease up the credit crisis and put liquidity back into the market.

The Dow also enjoyed an expected rebound today, as it broke the all time record for a point gain in a day, surging by 936 points, finishing the day at 9387.61

With all the government interference across the world, gold will probably swing up and down in big ways from day to day, as the uncertainty and almost daily announcements by central banks and governments leave investors unsure where things will go.

Any smart investor should know that much of what is happening now are moves related more to PR than it is to practical help. It's to soothe the fears of people rather than make any true positive impact.

History has shown that government interference only prolongs the pain, not helps ease it.

Gold is ready on the sidelines waiting for any excuse for investors to run to it for safety. I don't think its run up is anywhere near over, but the interference in the market makes it much harder to measure.

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