-- Posted Thursday, 18 September 2008 | Digg This Article
| Source: GoldSeek.com
By: Peter J. Cooper
What are we to make of the more than $100 gains in the gold price within the past 24 hours? It is certainly a historic day with the biggest movements in precious metals seen for decades. But as US President Ronald Regan once commented: ‘You ain’t seen nothing yet!’
Gold was clearly heavily oversold in July and August, and the entire precious metals complex was waiting for a signal to bounce back. However, the price movement that might have been expected over the next two months occurred in a single day.
This is indicative of systemic financial weakness, and it is not something that any authority in the world is going to be able to fix anytime soon. Does that make precious metals a one-way bet from here? I think it does, albeit with the rider that volatility will be very strong from hereon: what can move $100 in a day can be a very choppy performer.
But if the only way is up then any momentum trader can deal with this volatility, and possibly trade on the back of it, although using margin in the gold markets wiped many out in July and August and that ought to be a salutary lesson to those who gear up. That was yesterday’s strategy. In today’s credit crisis struck world borrowing is for fools who have not yet lost all their capital.
So what did best last night? My favorite junior was up 43 per cent, and my pure silver plays near 15 per cent and the best of the gold majors up 14 per cent. This comfortably outperformed the metals themselves, and this should be the pattern of the weeks, months and years ahead.
It is not too late - indeed it is still pretty early - to jump on the precious metals bandwagon. This promises to be a rocky ride to much higher valuation levels, and the systemic change towards the gold and silver standards of valuation could be permanent as the financial world finds a new modus operandi.
In the Gulf States the central bankers and finance ministers have been meeting to consider a new single currency this week. How long will it be before somebody raises the idea of a Gold Dinar again, and this time it will not be treated as a lunatic idea? Currencies backed by gold and silver are a way to beat inflation and put some confidence back into the financial system, and that is where we are heading now.
Peter J. Cooper
http://arabianmoney.net/
-- Posted Thursday, 18 September 2008 | Digg This Article | Source: GoldSeek.com
