Quote:
How do you explain the weak tone in precious metals?
I'm not sure exactly what a "weak tone" is but suspect that they are talking about the recent minor pull-back in metals prices. No market ever goes straight up. There is a lot of backing and filling going on and always has been. The metals are acting a lot better than most stocks and bonds, however. Sovereign debt issues in Europe and the US can have powerful effects on the prices of stocks and bonds but not on PMs. PMs have dropped in price recently primarily because investors are selling some of their winners to either cover their short equity positions or to increase their long equity positions. They are doing this because they have profits in PMs that they want to take and just about anything else they could sell to raise capital now would be sold at a loss.
Quote:
"It is a bit surprising that gold continues to act like a risk asset rather than as a safe haven, but in the short-term there is more need for dollars rather than need to hold profitable positions in gold."
Gold IS a safe haven and, for the most part, it IS acting like it. Investors are not selling gold because they don't like it. They are selling it because other investors will pay well to get it. Every sale of gold requires that someone else buy it, so it is clear to me that gold is still quite desirable to most investors. When you get a margin call, however, you NEED cash to settle the position and gold is one of the few areas where it can be had at a profit instead of a loss.
Besides, while gold is a low-risk asset IMO, it is not a risk-free asset. Its price moves up and down as the various currencies rise and fall. I would question the concept of anything being truly "risk free". What investors should end up with is risk management and not complete risk aversion. They can pick and choose the levels and types of risk with which they are least uncomfortable, however, and that is likely to be the very best that they can do.
Posted 11/22/2011 1:34 pm
