Frightened investors turning to gold

It's become a matter of policy bordering on irrationality for professional traders and investors to be hostile to gold. Yet when times get unpredictable and scary, people still turn to gold. This trend change deserves to be acknowledged.

Inflows into gold ETFs continued to grow throughout the quarter, with investors buying a record 469 tonnes of gold, dwarfing the previous quarterly record of 145 tonnes, set in the third quarter of last year. This took the total amount of gold in ETFs to 1,658 tonnes, worth US$48.6 billion, the World Gold Council said.

“One reason the financial crisis has been so devastating for investors is that many alternative assets did not deliver on the promise that they would provide portfolio diversification,” said Natalie Dempster, head of investment, North America for World Gold Council and author of GID. “The same cannot be said for gold. Gold has been one of the few assets that has genuinely provided investors with diversification throughout the financial crisis.”

For the first quarter 2009, the gold price ended at US$916.50/oz, on the London PM fix, representing a moderate increase of 4pc, contrasted against a 12pc decline in US stock prices during the period.

Anecdotal reports from coin and bar dealers also point to another very strong quarter in retail demand for coins and bars in Q1 09, after a 396pc year-on-year increase in Q4 08. Dealers have continued to report shortages in the availability of official coins and small bars.

Just today the price of gold rose because the IMF forecast the world economy was going to contract. This is significant because the the theory on Wall Street has been that the only time to own gold is in times of high inflation.
Instead, investors are buying gold hand over fist in times of economic depression, and even threats of deflation.

In fact, while the stock market literally crashed last year, gold ended 2008 up by 4.32%.
A ROI of less than 5% may not sound like much, until you compare it to the general stock market. In 2008, 471 out of the 500 stocks that make up the S&P index were losers. The overall index dropped 38.5% last year.

In fact, since April 2001 the price of gold in dollars has nearly quadrupled, while the overall stock market is flat.
You would think that such an impressive bull run would catch the attention of the average investor. Instead it took a massive crash of the overall stock market to finally get his/her attention.

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MTGM

The Mess That Greenspan Made would love this article. He's been talking about Gold for some time as a reaction to potential inflation.

I bought some but screwed up my timing (of course).

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There is an old saying on Wall Street

I bought some but screwed up my timing (of course).

If you make a bad entry point ."the bull will bail you out." Never fear RO this is a secular bull market ... all you need to do is hang on to the bull.

It has always been about class warfare.

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Peak Gold

The gold price has gone up 4-fold since 2001, but gold production peaked in 2001 and has declined ever since.
Meanwhile central banks around the world have been cutting interest rates on a steady basis these last 8 years, thus cheapening their currencies.

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If only I had the money & time

Sounds like I could very nicely pay for a vacation at Cracker Creek in Sumpter Valley, OR.

Only $120 and 4 hours work at a Highbanker could easily net you an ounce to an ounce and a half of the yellow stuff- and pay for the rest of your vacation.
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Executive compensation is inversely proportional to morality and ethics.

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Maximum jobs, not maximum profits.

Gold! Gold! Gold! Gold!

Gold! Gold! Gold! Gold!
The yellow metal has intrinsic value,
At least that’s what we are told.

Gary North says it’s so, and he would know.
He’s the investment guru of LewRockwell.com,
So it cannot – must not! – be a job of snow. No!

“A 50% drop in GDP during the first half of 2009.
Gloom! Doom!” cries Karl Denninger. But why,
Did he ban from Market Ticker this poem of mine?

“In coin shops all political truth can be found.”
So says Jeffrey Tucker. But how does he explain,
Why our golden investments have all run aground?

Zounds! $850, $250, $1000 and $700 in thirty years.
Gold prices are volatile, at least that much is clear,
I don’t get this dizzy after a whole case of beers!

Gold bugs claim: They’ve made millions since 1983.
But they’re living in plywood shacks in northern Idaho.
Should we believe what they tell us, or what we see?

In Moses’ time they danced around a golden calf,
Now Paulistas say, “Gold is money made by God.”
Not much has changed. What a laugh!

Click here to read more of my poetry.

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website: www.axiomaticeconomics.com

motto: Critiques and rebuttals are how science advances.

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