Fear of Paulson Plan Ignites Flight to Safety
Sep 23rd, 2008 | By Doug Casey | Category: Financial News, Gold MarketGold started up in Hong Kong and followed a nearly unbroken line higher through the day, cresting at $900 and remaining there late into the Globex, before easing slightly to a finish at $898.30, up $26.50 from Friday. Overnight, gold has drifted lower.
Platinum had a rare day of strong, steady gains straight through, hitting $1250 late in the day before drifting slightly lower to end at $1237/oz., up $98. Overnight, platinum has fallen off.
Silver generally followed the trajectory of its sister metals, easing off its peak for the day in the last hour of the Globex to close at $13.47/oz., up 85 cents. Overnight, silver has edged lower. (Click here for charts)
It was off to the races for the precious metals on Monday, as Hammerin’ Hank Paulson’s plan to save America, and perhaps the world, ran into some skepticism among traders increasingly nervous about the eventual fallout from the bailout.
Yesterday’s 3% rise in the gold price came hard on the heels of last week’s stellar +14% performance.
Dennis Gartman, editor of the Gartman Letter, said that, “Commodity prices have risen quite sharply as the dollar has weakened, and we do not think that is a one-day rebound.” The Paulson plan is “inordinately inflationary and highly supportive of commodity prices.”
Gartman, a gold pessimist until recently, now says: “We are witnessing a tidal shift in sentiment … We shall look to own commodities in U.S. dollar terms, effectively swapping dollars for stuff.”
Longtime gold bugs have always pointed out that gold is the only asset that is not simultaneously someone else’s liability, which entails “counterparty risk,” i.e. the risk that the other guy will go broke, default, whatever. Counterparty risk is what is bringing down investment banks and the whole derivatives market.
Thus James Turk, of Goldmoney.com, can confidently predict that gold will reclaim its place as the ultimate safe harbor “as this financial crisis continues to deepen because people become reluctant to have their wealth dependent on counterparty risk.”
Source: Precious metals sharply higher - Fear of the Paulson plan ignites flight to safety.
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.