Need for Liquidity Hurting the Market
Oct 17th, 2008 | By Doug Casey | Category: Financial NewsGold was mildly lower until the second hour of New York trading, when it suddenly fell off a cliff, giving up $35 in a matter of minutes, then fell again in the late morning to below $800, before late buying pushed it back up to finish at $804.30, down $33.80. Overnight, gold is trending lower.
Platinum declined from the overseas markets until near the noon hour, dropping below $850, but then rallied back to end at $896/oz., down $72. Overnight, platinum has fallen off.
Silver held up until early New York trading, then was smacked down, hard, dropping about a dollar in the next two hours and, though it recovered off its lows, was unable to make it back to the $10 mark, closing at $9.65/oz., down 60 cents. Overnight, silver has been flat. (Click here for charts)
The precious metals had a dismal day, as all the market forces turned against them, with equities rallying, the dollar moving higher, and oil falling through what was thought to be a pretty secure floor.
In addition, as always, gold gets dumped as the most liquid way to raise quick cash to cover losses elsewhere (or simply to hoard currency during a period that is, to say the least, volatile). Economists at research firm Action Economics report that some hedge funds have been forced to liquidate their positions for just that reason.
Bill Murphy, writing on LemetropoleCafe.com, offers his view of the situation right now: “Demand for physical gold is astonishing and yet the price goes nowhere. The dichotomy between the ‘real’ gold market and the Comex is widening.
“The US Government is petrified of gold rising to any degree because of its importance, in that a sharply rising price will shed light on ‘Dracula’ … or the hideous inflationary forces set in motion by Comrade Paulson’s bailout.”
Ominously, Murphy reports the following: “Several months ago we received reports that bullion dealers in the MidEast were making it much more difficult for buyers over there. Unfortunately similar reports are coming my way on a daily basis from all over the world that this trend is picking up speed. It appears governments and bullion banks are not banning gold, just making it very difficult to purchase.”
Conspiracy or not, there’s no disputing that there is not much physical gold to be had, as many dealers have stopped even taking orders.
Source: Precious metals hammered - Need for liquidity hurting the market.
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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.