Monday, September 26, 2011


As expected, Gold prices finally corrected from recent highs.
Many Gold bugs are panicking and as prices plunge, & investors are wondering if Gold's mega rally has finally run out of steam.

Firstly, I continue to believe that Gold's long term fundamental story is still intact.
The current state of govenment finances  combined with the ongoing post bubble debt deleveraging will mean that Gold will continue to retain its safe haven status.
Secondly, Gold has not suffered any serious technical damage on its long term chart.
Thirdly, a pullback in prices was long overdue after gold's monster rally from a sub $1500 price level.

Below is a link with some interesting charts.
Bull and Bear case for Gold, Silver and Stocks -- Looking at the chart below, gold prices have pulled back after testing the upper price band (Red line) of the chart.
Could we see a pullback to the green trendline like the 2008 correction?
As someone rightly said--Never say never!

Lastly, I would advise Goldbugs not to panic, but to just hold on patiently for now.
The troubles of the US Housing & Financial sector of 2008 have now morphed into stressed government finances and Sovereign debt crises of 2011.

In 2008 many corporates (especially in the financial sector) were downgraded by the rating agencies.
In 2011 several governments have had their Sovereign Credit ratings downgraded.
Once again the Credit rating agencies are raising red flags rather late in the day!!!!
As David Rosenberg recently pointed out, the aftermath of a post bubble debt deleveraging saga is no 'garden variety' recession.

Gold is still the last refuge in this storm, but investors will have to learn to ride out some mega volatility and corrections along the way.

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