-- Posted Wednesday, 31 December 2008 | | Source: GoldSeek.com
The Morning Gold Report by Peter A. Grant
Dec 31 a.m. (USAGOLD) -- Gold firmed in late trading on New Year's Eve after the dip into the 859.65/848.00 support zone generated some buying interest. The London fix was $865 versus the 833.75 fix on 28-Dec-07 (last trading day of last year). This was the eighth consecutive annual gain for the yellow metal.
The 3.7% gain in gold for 2008 was definitely not as impressive as the gains we've seen in the previous seven years. However, I would argue it's pretty darn impressive in relationship to the dismal performance of the more traditional asset classes this year.
I don't think that there is any question that 2008 will go down as one of the most tumultuous years in history. The speed at which the US (and global) economy went from boom to bust was absolutely astonishing.
While the housing crisis began in 2007 it really gained momentum in 2008 as home prices plummeted and people began to see their net worth evaporate. This led to a liquidity crisis, which in turn led to an all-out credit crisis.
Over the past year we've been witness to bank failures and the implosion of major financial institutions. We've seen the US auto industry brought to its knees. The DJIA lost a third of its value as investor confidence plunged. This resulted in even more wealth erosion.
We've seen the Federal government ride to the aid of some institutions and industries and allow others to fail and contract. Bear Stearns is too big to be allowed to fail, Lehman Bros...see ya later. AIG whatya need? IndyMac and WaMu...adios.
The one thing that seemed to be sorely lacking in the government's efforts was a cohesive plan. They seemed far too reactive and not very proactive at all. We need $700 bln to buy troubled assets...never mind we'll buy shares instead. The $700 bln is for the financial industry...on second thought let's throw some at the auto industry.
The government was everywhere stating that they were prepared to do whatever was necessary to prevent a complete meltdown of the financial system and a protracted recession. The one thing they failed to discuss in all those press conferences was the implications of their efforts. They were essentially encouraging the same reckless borrow and spend mentality that precipitated the crisis in the first place.
It all culminated a couple weeks ago when the Fed lowered interest rates to zero and said that they were prepared to print as much money as necessary. They also indicated that they were considering using those freshly printed dollars to buy our own debt. It was unquestionably the most disturbing policy statement I've ever read in more than 20-years in the industry.
What are the implications of this incredibly fluid situation? What might 2009 hold? Quite honestly it's difficult to accurately assess as things are changing constantly. A new bailout around every corner. A trillion here, a trillion there.
One thing I do know, is that as a gold owner myself, I do sleep a little more soundly at night knowing that I have some of the yellow metal stashed away. I hear the same thing from some of the dozens of people I speak to on a daily basis.
On behalf of everyone here at USAGOLD - Centennial Precious Metals, I would like to wish you all a Happy New Year. Good riddance to 2008 and let's hope that we see at least some semblance of stability in 2009. Good health, peace and prosperity to all.
