Feb 25 a.m. (USAGOLD) -- Gold turned corrective on Wednesday, reportedly knocked off its recent 11-month highs by aggressive fund selling in gold futures contracts. This selling was said by some to be related to options expiration.
The rather strong up-move we saw in gold last week, culminating in a push back above the $1,000 psychological barrier, returned considerable credence to the long-term uptrend. Despite this week's corrective tone, a retest of the all-time high at 1032.20 is still considered likely.
I'm sure everyone has noticed by now that every time the government announces a new plan, approves a new bailout, or even comments on the economy, the stock market tanks. It will be interesting to see how Wall Street reacts to President Obama's state of the union address.
Will he be able to instill some confidence? Or will investors continue to flock to the safety of physical gold ownership at the expense of the more traditional asset classes? As our own George Cooper noted in a Dow Jones Newswire piece, "Many of the calls are from investors who lament losing half of their life savings to the tumble in stocks."
People are starting to realize that despite the endless promises, the government isn't really going to take care of the individuals. Investors need to take strategic action to protect what they have, taking care of themselves and their families. Gold is an important component of that positioning, given the economic uncertainty that prevails.
Orders of The ABCs of Gold Investing, the book written by Mike Kosares, and info-packet requests are both important leading indicators for gold demand here. The indication is that if we think we're really busy now, but we probably haven't seen anything yet.
However, this is also extremely encouraging. People are looking to educate themselves before entering the gold market, rather than simply following the herd mentality.
Education is in fact a major tenet of the firm. We have proven time and time again that a well-educated buyer is ultimately our very best client. We are always willing to spend the time to further your education as it relates to precious metals.
We strongly encourage everyone to take the time to review our website, request an info-packet, read the ABCs and then pick the brains of our highly experienced brokers before you ever buy your first ounce of gold.
Just the fact that I'm here at 10:00PM trying to get a report up suggests that we continue to do our best to uphold our end of the education-pact we have with clients and interested parties. Much to my family's chagrin, late at night is the only opportunity I get to write anymore.
I have been pretty good about getting info out throughout the day via Twitter. Please consider following me at http://twitter.com/USAGOLD1.
On the bailout front, it looks like Citigroup is going to have to be rescued for the third time. Just how many chances does Citi get? With a share price of $2.60 as of Tuesday's close and the government already back-stopping their balance sheet, are they really too big to fail at this point?
The federal government is considering converting their preferred shares to common, taking up to a 40% stake in Citi. While the Obama administration says they have no intention of nationalizing the banks, it sure looks like nationalization more and more every day.
Meanwhile AIG is bracing for a Q4 loss of $60 bln and is seeking to restructure the terms of their $150 bln loan from the government. This would be their second restructuring in four months.
With AIG's shares at a paltry $0.41 and the auction of their alleged "crown jewel" Asian life insurance arm collapsing, one has to wonder how long this charade is going to continue. Does anybody really think AIG would be maintaining their credit rating without the backing of the government? Will anyone be surprised when AIG queues up for their next dose of bailout money?
One thing is for sure; considerable systemic risks persist. Wealth preservation is on everyone's mind and physical gold in your possession is one of the only assets that doesn't carry the counter-party risk that is all to clearly a part of just about every other asset class.
