Important Lessons From Todays Market Action
Monday, September 29, 2008 at 05:21PM
Gold Prices in Gold
Today the $700 billion bailout bill failed to be passed.

This caused massive swings in every market across the world, but what does this mean for gold investors?

In our opinion today investors dumped stocks heavily and this created a run into the US dollar, causing it to make some gains. This dampened the gains that gold would have made, but the crucial thing is that gold was making gains as the US dollar was rising too. Since they usually move in opposite directions, this is a sign of the tremendous strength building behind the yellow metal.

The real rally in gold is yet to come, and will probably occur when the investors that sold American stocks for US dollars today, switch from those rapidly devaluing dollars into gold as a safe haven. We are beginning to see this now in after hours trading as gold rises to $918.

We expect gold to challenge its old highs of $1000 be the end of the year. We are long on gold, big time, and would suggest that anyone who is not long on gold at present, buy a position to protect your portfolio from this financial turmoil, which is going to get a lot worse before it gets better.

Even if the bill is approved, it will have the effect of giving a short term boost to the US stock markets, and hence a dampening effect on gold, but in the long term gold would rise dramatically because of the $700billion cash injection. This is a dramatic increase in the money supply and therefore would create serious inflationary pressures, steering investor funds to the best inflation hedge, gold.

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