December 15, 2011 Leave a Comment
In September of 2011, Gold was known as the trade that would work in any kind of market. Now, Gold is having trouble working in any market.
Gold(Bullion) is down more than 15 percent from the all time high reached this September. Its success earlier in the year was because gold was being sold by Hedge Funds to raise other funds. The recent strength of the US dollar isn’t helping it either. When investors are insecure about the status of the US dollar or any currency, they invest more in gold, using it as a Hedge (safe investment during times of uncertainty).
When gold was at its best this year it was rising with stocks as central banks added liquidity to “stemoff” a global financial crisis. Investors were pouring more money into gold funds than any other possible assets. Now at the end of 2011, gold has lost this status.
Michael Murphy,CEO of Hedge Fund Rosecliff Capital, has witnessed first hand this recent downturn in the bullion. He stated that:
“Gold was a safe haven,a hedge and a speculative trade all at the same time. Long gold has been winning trade for years. We expect the selloff in gold to gain momentum into 2012. Traders are finding better hedges,better safe havens, and better speculative commodity plays than long gold.”
Gold has been falling with stocks this week, and even when stocks have come back to life, gold continues to fall. When gold continues to fall, currencies tend to rise. This is a great tool that investors use when deciding where they want their money to work for them.
The bearish gold market is no surprise to investors. Trading gold has always been a very volatile transaction, and investors should know this when they have their money sitting in it. The recent volatility of gold is functioning like a roller coaster, making it difficult for investors to predict how it will do in the near future.
I personally believe that gold will bounce back. With the uncertainty of most currencies and the very volatile markets, investors will look back towards gold as a hedge for their investments. I stress safe investments at times like this because risk can simply be too much. Investors have to think and invest wisely.
I predict that gold will earn its respectable status back early in 2012.