3rd March 2007 - Gold Dropped on Stock Market Jitters
We were surprised to see gold fall on the recent stock market jitters. Our feeling is that it should have risen, but gold may have been sold to cover stock market margins.
This thought was expressed by numerous financial commentators and forecasters, so we would expect it to bounce up again fairly smartly. Wake Up
If you read the excellent book "Wake Up", as we have done, and come to the same conclusion that we did, then you will agree with us that in times of anticipated stock market glitches or failure, then smart money will be looking for a safe haven. We believe gold is one of the safest havens, and therefore expect demand for it to be increasing, and its price to rise in line with the demand.
Delayed Reaction
Although most investors and pundits spend much time crystal-ball gazing, and trying to predict and preempt trends, we have notice on many occasions before that we have been right in predicting markets, but that there has often been a considerable delay before everybody else caught on.
We think this is one of those times. There are billions of dollars invested in stocks, shares and bonds. Many of these investments are priced too high in relation to the amount of risk. One of the main risks is US and world recession.
Margin Calls
We noticed at least numerous financial journalists concluding that investors had sold gold, on which they were probably showing a profit, to cover margin calls on shares and options. This would explain why gold dipped from around £350 / $683 / €520 to around £332 / $637 / €485.
There is no other sensible explanation as far as we are concerned, and the same people, along with many others are surely going to be buying gold now or soon. A stock market shakeout or correction is surely overdue, and it can only be a matter of time before many more people realise it, in which case it could turn into a full scale rout, with panic selling, stop loss selling triggers, limits down, and daily "doom" headlines. Exactly when the vast majority of investors will realise this, we do not know, except that it will probably be too late as usual.
Where is the Smart Money?
Perhaps the really big, smart money men, like Warren Buffet, have been stockpiling gold, silver, and other precious metals for a few years now, which could explain why prices have been rising for a few years already. There certainly is plenty of scope for upward further price movements.Ross Norman of The Bullion Desk has forecast $850 for gold in 2007, and he has been very accurate in recent years.
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