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Gold price rises as global stock markets sell off, this is different to the fall of 2008

By: Peter Cooper, Arabian Money


-- Posted Wednesday, 11 April 2012 | | Disqus

Gold prices have actually risen quite sharply and silver has held its ground as global stock markets took a dive this week. So far there has been none of the price crushing rush to sell off gold and silver to meet stock market margin calls that we saw in late 2008.

That could still come of course. Oil, on the other hand, has already hit an eight-week low. But as an article on this website pointed out recently not all recessions are bad for the price of precious metals (click here). It could be different this time with oil down and gold up.

Demand for precious metal is coming from multiple sources now. The same guys that are printing the money and causing global inflation to tick up, the central banks, have also emerged as big buyers of gold. Less wealthy investors have been buying silver in larger and larger numbers.

To be fair most of the new buying by central banks is coming from the emerging markets and not the old money printers: China, Russia, Saudi Arabia, India, Mexico and Brazil. They all want to build up their gold reserves as a hedge against a collapse in the value of the dollar after this November’s US presidential election and to strengthen the independence of their own currencies.

Eventually the BRICS would all like to have free floating global currencies and use them for trade rather than the dollar. Accumulating gold is a part of this long-term strategy. It also has the effect of underpinning the gold market where production levels remain fairly static against this background of rising demand.

Big buyers?

Are these central banks buying gold on the down days for the price? ArabianMoney thinks it will only be a matter of time before the respective authorities confirm their purchases. After all if kept secret then you might as well not have them in terms of bolstering confidence in your currency.

We also recall just how quickly gold and silver rebounded after the 2008-9 price crash. Again there was fundamental demand from very strong buyers. We are sure that would happen again but we may have moved on to a new script this time.

If so precious metal traders anticipating a repeat of the recent past could lose a fortune instead of making one by just buying and holding.


-- Posted Wednesday, 11 April 2012 | Digg This Article | Source: GoldSeek.com

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About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link




 



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