Auguries — Twilight For Gold?
December 15, 2011
By Kevin Michael Grace

Precious metals were hammered this week, with (at press time) gold down $138.60 (-8.1%) to $1,573.80 and silver down $2.36 (-7.5%) to $29.28. Reuters attributed the sell-off to a “dash for cash,” which has “overwhelmed gold’s traditional status as a haven from risk.”

According to Rupert Caldecott of Dalton Strategic Partnership, “With so many assets declining daily in value, cash has its merits. The bond markets are offering no help. The problem with safe havens is that they have proven not to be safe at all, and the list is getting shorter. It may only be cash very shortly.”

This explanation appears more than a little counter-intuitive and more than usually post hoc ergo propter hoc. David Urani asks at Wall Street Strategies, “Wait, so Europe is going down the toilet; the very existence of the Euro currency is being questioned; and the global economy is looking very shaky. Wouldn’t those all be good reasons to buy gold?” The problem is, “If you’re a gold bug, then the real bane of your portfolio right now is the dollar. The Achilles heel of gold is the fact that it’s priced in dollars.” And he demonstrates with a chart that “Gold’s movement is [now] nearly a mirror image of the dollar.”

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