The gang of four
The latest pronouncements on the financial bailout package went down like a lead balloon as the DOW fell 381 points, the US Dollar rose 1.05%, Gold rose to $915/oz but the Gold Bugs Index, the HUI, dropped 5 points, Rats!
We cant deduce much from one days data but we tend to expect that the gold producers would improve when gold has a good day, however, the broader market, the DOW was sold off dragging the precious metals sector down with it, effectively ignoring golds progress.
Now, if the Obama academy of scholars take a look at todays response to their proposals they will not be too pleased. The next plan to boost the feel good factor will be on the drawing board right now and launched as soon as possible in an attempt to the reverse the stock markets weakness. And they could well succeed driving the market up and hopefully taking our portfolio along with it. However, investors will only be fooled for a short time and then the problems of a disintegrating economy will send them to the exit. At this point the precious metals sector could take another battering just as it did last year. If we cast our minds back to when gold was trading at $1000/oz, stocks such as Agnico-Eagle were trading at $80.00 per share. A 9% increase in the price of gold will see it back up there but Agnico-Eagle would need to improve by 80% to re-gain parity.
It appears to us that the next month or so could see us experience a small rally followed by a serious sell off across all the market sectors, leaving us with a feeling of trepidation at this point. However, many of our peers in this sector are GO, GO, GO, Gold Bugs with a strategy of BUY, BUY, BUY. We agree with a lot of what they say and remain long term gold bugs, however if we detect a bloody nose heading in our direction we will post our concerns immediately.
We are living through an unbelievable phase in economic history so stay awake and on your toes as volatility will be the order of the day.
Buying gold? You might want to watch this:
Video clip of the week:
Investing in physical gold on BNN, Demand for gold bullion is at an all time high. BNN interviews Zaman Monirez, president of the Bullion Mart, on the ins and outs of investing in physical gold.
Book of the week:
Den of Thieves by James B Stewart
The shenanigans that are going on today are not new, they just involve numbers so large that it is difficult to comprehend what is going on. In the 1980s financial irregularities were alive and well with insider trading, junk bonds et al. Some of the names will be familiar to you; Kidder Peabody, Ivan Boesky, Drexel Burnham, Goldman Sachs, Lazard Freres, Shearson Lehman Bros, Merrill Lynch and of course, Micheal Milken, the list goes on.
Stay tuned folks..
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