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« The Federal Reserve: The Greatest Scam In History? | Main | Central Banks Print Another $167 bln: This Will Not Solve The Problem »
Sunday
Aug122007

Global Stock Markets Fall As Gold Prices Rise

Across the water in the United States, the Federal Reserve threw another $38 billion into the market to try and give it some support, a complete waste of time and money in our opinion. Here is London we watched the stock market plunge 232.9 points down to 6,038.3, the biggest fall in years as £56 billion or US$113 billion was wiped off the market in just one day of trading.

FTSE 12 August


This was the reaction of the majority of the global markets, despite central banks across three continents injecting billions of dollars into world financial markets for the first time since the 9/11 attacks.

The ripples of the US sub prime housing market have become waves that are smashing stock markets worldwide. We think these property crash will not only happen in the USA, but in other areas of the world such as the UK.

TSX 12 August

The Canadian market is down roughly 1000 points in recent trading but the affects of this “credit crunch” are reaching across the world as the stock market in Hong Kong has been hit quite badly.

Hong Kong 12 Aug

The only major stock index that seems to be bucking the trend is Shanghai, as the index continues to make impressive gains, rising 18% whilst everything else is falling apart.

SSEC 12 Aug

As readers of our free Gold Prices Newsletter will know, on Thursday we wrote about the money being pumped into the market by central banks and how we believed this was not helping the problem, but making it worse. We also wrote about investors looking for a safe haven from the trouble in the global stock markets. On Thursday gold was down even though the stock markets around the world were plunging. However, yields on 30-day commercial paper rose 5 basis points to 5.32 per cent, equalling its highest rate since 2001 on Thursday and we said that it would only be a matter of time before investors realised that the best “safe haven” for the long term is gold and gold stocks. We based this on the fact that two year bonds actually fell on Thursday, so investors were buying the 30 day bonds as a temporary position whilst they decided where to go for the longer term. If bonds were the investors choice as a safe haven then the 2 year bonds would have risen.

However, the best safe haven for investors rose considerably on Friday, as gold shot up over ten dollars to close over $670/ounce.

Gold Intraday 12 August

This is a very positive short term move for gold, and is shows it reacts positively to chaos in the main stream financial market, which is what we expected as we see a major downturn in global stock markets coming soon. Looking at the intermediate situation that gold is in, we are slightly concerned about the double top formation that gold prices have made over the last few weeks at $688.

Gold Prices Chart 12 Aug

So we could see a slight down turn in gold if gold prices don't make a new high above $688, but this is short term and as long term investors in the gold bull market, we are more focused on the long term outlook for gold. We see a major new rally in gold beginning at the of the summer and gold stocks are one of the best ways to take advantage of this rally. Keep informed and updated on the gold market and gold stocks by subscribing to The Gold Prices Newsletter completely free of charge.

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Reader Comments (6)

This is only the beginning of worldwide collapse. China and Russia will benefit. Commodities like metals and energy are the only safe bet in the future. The robber barons have this time pulled off the largest theft in their long history of deliberate crashes. Too bad Europe, under the cloak of the EU and London, along with the US, allowed the banker barons to once again collapse their economies. It's just so easy for them. I guess the US taxpayer will cover the losses again, unless they wake up and shut down the FEDERAL RESERVE. All this while the merchants of Wall Street and mortgage lenders hide out with their billions in hedgefund treasure in some Crown colony, Mumbia or Dubai. And don't think Russia or China will welcome them. And they, very soon,will become the economic leaders. They know who they are dealing with, unlike the sleepy US and Europe who have a history of stupidity, giving thier blood and treasure, hook, line and sinker to these thieves! Better get out of the markets now while you still can! And watch that there isn't a run on the banks like 1933! Read SilverBearCafe.com online for daily updates from economists that don't lie or spin the facts.

August 13, 2007 | Unregistered CommenterMary

Any thoughts on how the Canadian dollar might be affected given a deteriorating US dollar? Never seem to get much info on this.

On one hand Canada has a strong resource based econonmy but on the other the US is our biggest trading partner. Not sure how that plays out. Any thoughts would be appreciated.

Cheers,

August 13, 2007 | Unregistered CommenterKevin

It is true that gold rose on Friday while equities fell, but in nearly all the other very recent cases where equities fell gold fell just as hard. I think that a one time event does not make a trend. Today, gold was down, gold stocks fell harder, while for most of the day equities were up and when they fell gold went with it, a little. I think that one must wait until the end of the week to be sure that gold and equities have uncoupled.

I think that gold and other PMs are very vunerable now and could drop precipitously. The markets are very jittery.

It may have been a mistake for the central banks to pump in all that cash but a bigger mistake was not to cut the rate by 25 bps. I am sure that they now regret it.

Nevertheless, all these bad loans have created this horrible mess. One cannot lend money to those that cannot pay, especially with those arms.

August 14, 2007 | Unregistered CommenterFrank

In my email yesterday, I should have made the point that the world stock market crash is taking gold shares with it. You said that on Friday gold went up while equities went down considerably. But you ignored the fact that gold shares did not do nearly as well as gold itself.
Today we are seeing an exaggeration of that phenomenon.
Gold is down only slightly but gold shares are plummeting just like equities are. So some people may be buying gold bullion and ETFs but are selling gold shares.

This may be a disaster for many investors, not anticipated by the so-called analysts, who are largely untrained and incompetent.

Frank

August 14, 2007 | Unregistered CommenterFrank

If you compare Gold with the HUI since the year 2000 you will see that Gold is up about 150% and the HUI is up about 400%. The day-to-day fluctuations should be viewed in the overall context of the major trend, which puts owning Gold mining stocks way ahead of owning the metal.

August 14, 2007 | Unregistered CommenterGold Prices

iT WAS SAID BY OUR BROKER THAT CURRENCY MOVEMENTS ARE VERY MUCH PREDICTABLE WHEREAS THE GOLD MOVEMENT CAN GO ANY DIRECTION IRRESPECTIVE OF DOLLAR STRENGTH, OIL PRICE ...
BUT IN THE RECENT PAST, THE MOVEMENT OF CURRENCIES WAS AGAINST THE POSSIBLE ANTICIPATION.WHAT IS ALWAYS TRUE IS THAT THE MOVEMENT OF PRICE OF COMMODITIES, CURRENCIES OR PRECIOUS METALS IS UNPREDICTABLE WITH THE AVAILABLE INFORMATIONS. ONE THING IS TRUE, IT'S EASY TO FALL RATHER THAN GROW UP

August 15, 2007 | Unregistered CommenterEMMANUEL

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