Post 2008 the economic mortgage disaster that caused the decimation of several major banks led many investors, traders, and funds to the decision of holding substantially more gold within their portfolios. Choosing to invest in Gold while Gold’s current market price is at a record rates makes Gold a safe haven trapped in a Bearish market.
Most central banks have increased the level of money available through simply printing more money while cutting interest rates in order to prop up stock markets at the same time. Gold is considered by many investors to be a good alternative, resulting in millions of speculators placing their fortunes with it taking Gold’s market price even higher.
In today’s market traders can smell a new economic disaster brewing within the EU’s leading industrialized members where even top countries are at risk of losing important credit ratings, and inflation threatens to weaken the value of money altogether. Government debt to GDP ratios are rising while manufacturing and productivity sits at negative growth, with unemployment in the double digits. The question is can Gold be trusted to continue rising in terms of market price?
At this point in the market it isn’t clear whether or not Gold prices are struggling to hold on at $1560 per Troy Ounce. Coupled with a correlation against stock prices of roughly 75%, a break downwards in the stock market is likely to take Gold with it as well with estimates ranging around 5 year lows.
Traders themselves should consider other attractive commodity based alternatives in the market when in search of positive gains. With fast moving volatile markets scheduled for the next 2-3 months traders must realize that Gold may not be the natural hedge it has been previously in light of possible upcoming market bubbles.