In the wake of the Dollar’s rally during the Dubai scare late last year, I did a fairly prescient Public Service Announcement here on TRB. The gist of it was:
Gold is no longer any kind of “Safe Haven”. Those days ended when the 38th gold ETF came public and the 900th commercial for gold coins ran on Fox News during the Glenn Beck Paranoid Lunatics Anonymous Hour.
Don’t get it twisted – gold is now the quintessential risk trade, moving in tandem with risk appetites and the pursuit of momentum by investors around the world.
Don’t believe me? How about this…during Thanksgiving week, when half of the country’s traders were away from their screens, you got your proof:
A camel sneezed in Dubai and the immediate reaction was a flight – TO THE US DOLLAR.
And once again global markets are rocked by the specter of mass defaults of sovereign nations among other things. And once again the US Dollar rallies (especially against the Euro) while gold, which would’ve traditionally been the hiding place during an event like this one, gets knocked down yet another 5% on the day.
Too much hot money in the precious metals and related stocks, they can’t act like they used to until that hot money has been wrung out.