Some weird things are happening in the gold market. For one thing, the spot price is becoming less relevant.

Such is the scramble for gold coins and bullion that dealers have widened the spread between the spot price and their premiums. The reason for this scramble is simple — investors want out of equities. Gold — and especially physical gold — is a classic safe haven.

The yellow metal is now at around $844 an ounce. Recently, though, it surged as high as $931, a record high.

"But hang on!" I hear you thinking. "Didn’t gold go higher than this earlier in the year, to over $1,000 an ounce?"

Ah, yes. But the dollar was weaker then. Each of those thousand or so dollars would buy you less then than they would now. As an aside, I reckon all this dollar strength is a temporary thing. But I’ll come back to that...

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Priced in pounds or euros, gold has explored uncharted territory. That $931 translated into a price-per-ounce of £550.80 and €668.77 respectively.

It’s worth bearing in mind that, if your aim is to preserve your wealth, you’re primarily concerned with the currency you actually buy things with. That, after all, is how hedges like gold are supposed to work.

If the pound falls against the dollar, your ounce of gold is worth more in this country even if the dollar price of gold stays the same. If the price in dollars rises at the same time, you get a double whammy.

I have to say, the scramble into gold has left me a little alarmed. It has a definite whiff of the herd about it.

It’s stating the obvious, but the price of gold can move both ways (it’s fallen since those highs mentioned above).

As I’ve said before, I regard gold as a safety-first investment. An investment that can benefit at times of uncertainty and panic.

If you haven’t already, you can download your complimentary report Buying Gold Coins for Financial Profit & Protection here.

In it you’ll discover just why so many investors are so keen on gold — and what the potential pitfalls are.

Enjoy!

Armageddon "not going to happen"

"Today’s valuations are discounting Armageddon," says our commodities man Garry White. "And Armageddon’s not going to happen."

The prospect of a world economic slowdown has hit commodity prices. But Garry reckons that — thanks to the financial tornado affecting all markets right now — commodities have been hit too hard.

There’s something else going on, too. As investors panic, some of them are selling foreign holdings and repatriating the funds. Since many of those investors are American, those funds are flowing back into the dollar, pushing up the value of the greenback.

The dollar’s status as Reserve Currency of the World has also seen it benefit from a flight to (perceived) quality.

Here’s what I think. This new found dollar strength may persist for a while. But it ain’t gonna last. Apart from anything else, $700 billion will have to be found to pay for this bailout. Will they end up simply printing the things? It’s a risk — and a risk that currency investors will be well aware of.

True, the same or similar can be said for both the pound and the euro. But there’s more going on beneath the surface. The dollar’s status as a reserve currency can’t be maintained forever. That currency has most to lose as the financial and monetary status quo comes under further pressure — which I believe is assured.

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"Investors have been literally considering what’ll happen tomorrow," adds Garry. With banks going bust and uncertainty king, markets have been less forward looking than usual. The time horizon has been very short.

That won’t last. Before long, investors will take account of the new global economic and financial picture. And they won’t like what they see — an indebted West supporting stricken financial institutions, and a reserve currency under more strain than ever before.

Find out why Garry reckons renewed dollar weakness will be good news for investors in commodities.

Until tomorrow

Ben Traynor
Editor
Fleet Street Daily

PS Did you get a chance to read my extra email on Monday? It was about a market trader who’s having a whale of a time right now, despite — probably because of — all the uncertainty there is.

As he says himself: "We are in an amazingly volatile time in the markets and are just coming in to a period of potentially MASSIVE profits. [My] signals are flagging something really huge about to happen in the next few months."

This guy’s planning to clean up big time. Find out here how he can help you do the same.

The Daily Reckoning — The Eye of the Hurricane

"What’s the capital of Iceland?"

"Oh...about $6.50."

That’s the joke that is making its way around London this morning.

Iceland has melted down. Now, the government has pledged to save the banking sector — but at a cost of nearly $500,000 per citizen! In Europe, the cost so far is estimated at about $7,000 per citizen. But experts insist that much of that money — loaned to the banks — will come back to the government.

And in America? Who knows...?

You can read the Daily Reckoning in full here.

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P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.

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