May 6, 2010 may turn out to be a watershed day. For the first time in this writer's recollection, a widespread, panicked flight to safety included a massive flight into gold. This reversed what has been the dominant trend over the past few years and presages an eventual sharp rise in the price of gold and its equities.
The day started quietly enough. After two days of moderate declines, the Dow Jones Industrial Average (used here as a proxy for the general market, which followed a similar pattern) opened slightly down and drifted gradually lower. Physical gold was up $10/oz. and the equities were somewhat higher. And this was the pattern till about 2:00 p.m., when things began to unravel. The Dow dropped fairly suddenly to minus 400. Within the next half hour or so the Dow had dropped another almost 600 points.
There must have been shock and awe on the trading floor, and one can only imagine what the Plunge Protection Team was doing. Flooding the world markets with liquidity I would expect. In any event, the market turned sharply back up and finished the day less than 400 points lower than yesterday's close. The metals themselves finished the day well up, with gold gaining about $35/oz on the day. The metals equities plunged briefly when the market plummeted, but they finished in positive territory.
There is a lot of speculation as to what exactly happened to cause the market to drop so precipitously or bounce so strongly. If any explanation is needed, I have not found an adequate one. What was most significant to me was the performance of the metals relative to the general market. For the past few years (at least) every large flight to safety has consisted of a general flight from the "risk" assets, including the metals and commodities more generally, into the relative "safety" of U.S. treasuries and the dollar.
This time it was different. This time, although there was a flight from essentially every equities and commodity futures market in the world, the physical metals ended the day significantly higher, and the metals equities were also higher on the day. It was a change of paradigm. On May 6, 2010, panicked investors fled into gold and silver as well as the dollar.
No one knows for sure what the next few days, weeks or even months may bring, but May 6 cannot be erased from history. Even if the paradigm shift is not yet complete and continuous, the door has been opened. If future flights to safety include a flight into the metals, as it looks like they will, then the metals are about to begin a monumental increase in value. The metals markets are far too small to harbor even a small amount of the fleeing hot money without enormous price increases.
I find it hard to believe that gold could roar upward to new historic highs in the face of a massive decline in the world equities and commodities futures markets (which I expect to happen). The evidence of the past few years points too strongly in the opposite direction. But May 6 suggests that the metals markets may be more resistant to sell-off and capitulation than I had expected. It also strongly suggests that after a correction, the first hints of inflation will send the metals to levels that would sound absurd today.
It looks like a paradigm shift.
The day started quietly enough. After two days of moderate declines, the Dow Jones Industrial Average (used here as a proxy for the general market, which followed a similar pattern) opened slightly down and drifted gradually lower. Physical gold was up $10/oz. and the equities were somewhat higher. And this was the pattern till about 2:00 p.m., when things began to unravel. The Dow dropped fairly suddenly to minus 400. Within the next half hour or so the Dow had dropped another almost 600 points.
There must have been shock and awe on the trading floor, and one can only imagine what the Plunge Protection Team was doing. Flooding the world markets with liquidity I would expect. In any event, the market turned sharply back up and finished the day less than 400 points lower than yesterday's close. The metals themselves finished the day well up, with gold gaining about $35/oz on the day. The metals equities plunged briefly when the market plummeted, but they finished in positive territory.
There is a lot of speculation as to what exactly happened to cause the market to drop so precipitously or bounce so strongly. If any explanation is needed, I have not found an adequate one. What was most significant to me was the performance of the metals relative to the general market. For the past few years (at least) every large flight to safety has consisted of a general flight from the "risk" assets, including the metals and commodities more generally, into the relative "safety" of U.S. treasuries and the dollar.
This time it was different. This time, although there was a flight from essentially every equities and commodity futures market in the world, the physical metals ended the day significantly higher, and the metals equities were also higher on the day. It was a change of paradigm. On May 6, 2010, panicked investors fled into gold and silver as well as the dollar.
No one knows for sure what the next few days, weeks or even months may bring, but May 6 cannot be erased from history. Even if the paradigm shift is not yet complete and continuous, the door has been opened. If future flights to safety include a flight into the metals, as it looks like they will, then the metals are about to begin a monumental increase in value. The metals markets are far too small to harbor even a small amount of the fleeing hot money without enormous price increases.
I find it hard to believe that gold could roar upward to new historic highs in the face of a massive decline in the world equities and commodities futures markets (which I expect to happen). The evidence of the past few years points too strongly in the opposite direction. But May 6 suggests that the metals markets may be more resistant to sell-off and capitulation than I had expected. It also strongly suggests that after a correction, the first hints of inflation will send the metals to levels that would sound absurd today.
It looks like a paradigm shift.
Ken Gibert is a professional writer and business marketing consultant and operates Golden Sun Consulting. He specializes in writing--articles, copywriting, ghostwriting...any kind of writing--and marketing consulting. He has long advocated investing in the precious metals and has written extensively on the stock and commodity markets.
If you're interested in the author or for more information on marketing or writing samples, please see my site at: http://www.goldensunconsulting.com.
If you're interested in the author or for more information on marketing or writing samples, please see my site at: http://www.goldensunconsulting.com.
Tidak ada komentar:
Posting Komentar