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Tuesday, April 16, 2013

Remember Gold the Safe Haven?

gold pileAfter selling off the shiny metal and its once sexy ETF peripherals, gold is getting a bid today on the regrettable reminder that it is the safe haven standard for mankind. Before Boston, investors could not get out of their own way fast enough to dump gold, silver and everything shiny. Today, with the New York City police street presence upped by 1,000 officers, Wall Street is getting its reminder first hand and spot gold is higher by 2.4% as of 10:55 AM ET.

Gold AnalystOur founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Gold Safe Haven


The events that transpired in Boston disrupted the iconic event and our peace of mind. They were likewise disruptive to the suddenly popular trade to sell gold, silver and all precious metals and their ETF peripheral securities. Gold was falling off a cliff before the bombs exploded, but investors remembered why and when mankind seeks its historic trading tool in the unfortunate aftermath. It’s a tragic day, but the previous decline in gold now offers investors an opportunity to take a stake that should prove highly profitable in my opinion.

The reason why the gold short trade got hot is debatable, especially considering the nascent economic trend pointing toward global demise. The last remaining fuel for hope, China growth, was debatable, and we debunked some of it for you over recent days. The fuel was proven impotent yesterday, with weak data emerging out of China. Furthermore, I recently showed that the real unemployment rate is likely closer to 11.9% than 7.6%, and underemployment is probably 17.8%, not 13.8%, by my estimation. The economy is deteriorating, which should be supportive of gold demand.



I heard an interesting perspective this morning, in which a talking head discussed the troika’s push to Cyprus, demanding it sell its gold reserves to pay itself out of crisis. It would not have drawn enough cash to compensate Cyprus’ creditors, but it reportedly put fear in the heart of gold bugs. You can see some of that here in the performance of relative ETF securities and a couple major miners.

Security
Year-to-Date to April 15
SPDR Gold Shares (NYSE: GLD)
-19%
iShares Silver Trust (NYSE: SLV)
-25%
Market Vectors Gold Miners (NYSE: GDX)
-37%
iShares Gold Trust (NYSE: IAU)
-19%
ProShares Ultra Silver (NYSE: AGQ)
-46%
Goldcorp (NYSE: GG)
-24%
Newmont Mining (NYSE: NEM)
-26%


The latest terrorist event in Boston was unexpected, and shocked the market and the precious metals. However, other threats hover over securities and support gold and relatives here as well. Pressing the geopolitical scene today is the near daily threats of nuclear war by North Korea, and the expectation that the chaotic communist state could launch a missile and test the resolve of its neighbors or test a nuclear weapon. We have become a bit desensitized to the threats of North Korea, with an understanding established now that the nation’s threats are merely its means of demanding international aid for its starving population. However, with Chinese troops building up at the border and South Korea and Japan preparing anti-missile batteries with U.S. anti-missile destroyers lurking in the nearby sea, the threat of a miscue mounts. The Korean Peninsula is just one heating hot spot.

Iran is also warming. The President of the United States and his counterpart in Israel have publicly stated that the long dreaded Iranian nuclear weapon capability deadline is probably about one year away now. Leaders have also continuously noted that engagement of Iran is a better bad option than a nuclear Iran. So then how long will it be before chaos reigns and the sound of war drums is replaced by the whistles of war missiles? Obviously, it will not be much longer. When that day arrives, will not dollar demand be replaced by gold?

SPDR Gold GLD Chart

So, there are enough reasons to seek safe haven. Boston only served as a reminder of them all. With gold having capitulated, as you can see in the late drop-off in the GLD chart here, we likely have a special opportunity to take stakes.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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