Last Wednesday gold hit an 11-month low. It prompted a lot of head scratching. How come, amid all this chaos, the classic safe haven investment was having such a bad time?
We gave our answer last Thursday, when we asked if gold’s dip was buying opportunity, or a signal to get out. Our answer was the former - buying opportunity.
"The overall background for gold is actually bullish," wrote our commodities expert Garry White.
On Friday I followed this up with a piece called ‘Why gold’s weakness is temporary’.
Well, it seems the forces of nature have reasserted themselves. It just took a Lehman’s sized push to rouse them, that’s all...
From a low of $740.75 last Wednesday, gold has soared all the way up to $862.90. Anyone who bought gold last week will, despite the gloom, probably be smiling right now.
The obvious question, though, is whether this surge means the opportunity has passed. I was chatting to colleague Bill Bonner about this last night:
"A lot of people had been buying gold as an inflation hedge. Now they’re buying it as a deflation hedge... it works both ways."
If you’re a short-term trader, you may be kicking yourself if you missed the big move. But those of us who invest for the long run look at things differently. Gold is a hedge. It is an investment which, history has shown, tends to keep its head when others are losing it.
That’s not to say it’s a one-way street. This week’s gains could well be reversed. But hard core gold fans won’t be fazed if that happens. Gold isn’t something you buy to get rich quick. You buy it "just in case"...
The investment lesson of this week’s rally is that, when a flight to safety occurs, gold is the place to be. And, as I’ll be revealing in future editions of FSD, there are plenty of reasons to believe even more investors will be running for the hills.
Until next time
Ben Traynor
Editor
Fleet Street Daily
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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Registered office 7th Floor, Sea Containers House, Upper Ground, London SE1 9JD. Registered in England with Co. No. 1937374. VAT No GB629 7287 94
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