Great news – the gold market rebounded nearly nine bucks! Posted by James Randolph on June 15, 2011
As the gold market gyrates, the value of gold doesn’t change.
June 15, 2011 – Great news – the gold market rebounded nearly nine bucks! But then again, the Dow, S & P, and Nasdaq are also up. So are T-bills and T-bonds. And oil. And the euro. Last week they were all going down.
Asset classes aren’t supposed to move in unison, either up or down. When they do, something is amiss. It’s still too early to be certain, but it looks like we could be heading for what economists call a “liquidation event.”
We have been witnessing uncertainty across the board for months now with investors oscillating between risk-on and risk-off sentiment and jumping back and forth between asset classes. As conditions deteriorate the movement between classes becomes less defined. Like a massive school of sardines they zig and zag into and out of investments altogether.
All it really means is that reality is finally sinking in. The Fed is caught between a rock and a hard place – either it sits back and lets the fundamentals take charge or it jumps right back in with another stimulus program.
The quickest and surest route to real recovery is to let the markets work things out while the government redefines its purpose, to take our lumps now so we can get to the business of rebuilding. It’s the sensible thing to do, so it is also the least likely thing our government will do.
The other option has one overpowering advantage: it could postpone the inevitable until after elections. The price will be enormous, and further stimulus will undoubtedly make things much worse in the end, but politicians have their priorities.
Either way, we’re in for hard times. Mass market movements worry me – they disrupt rational balance and can instantly and unexpectedly wipe out investments. I believe equities are particularly vulnerable, and I see any upswing as an opportunity to divest.
Quite the opposite is true of gold. Regardless of how gold market prices move, the value of the gold I have stored in the bank will not change.
Senior Staff Writer – Certified Gold Exchange