So Is Gold a Safe-Haven?
And why there’s no need to worry about downside

I’ll attempt to keep it simple. Let’s try some very quick 1st grade math. We’ll even use estimates.

Monday, February 26:
S&P – 1,450
Gold – 690
Ratio – 2.10
(Dow Ratio – 18.3)

Friday, March 2:
S&P – 1,387
Gold – 640
Ratio – 2.17
(Dow Ratio – 18.9)

It seems like it acted like a safe-haven to me. Even after that sell-off you wouldn’t have lost a dime! Here are few additional things you may want to bear in mind after this sell off.

1. The Hedge Theory. Many claim that many investors sell “other” assets to make up for their losses in stocks. This is also due to a significant number of growth investors who hold gold as part of their portfolios as a hedge against inflation and trading mistakes. Unfortunately, this works as long as stocks remain high enough to rake profits from (not long), and for those who own gold (not many).

2. The Carry-Trade Theory. Many believe that the sell-off of gold last week and a surge in outstanding interests (most probably short-positions), along with the rest of the markets, was due to a leveraged position in the Yen Carry Trade. This seems to be untrue simply because Carry Traders are yield pigs, and as we know gold offers no such thing.

If that be the case we may see some serious BTC (Buying-To-Cover) this week, and violently. All we can say? Stay Long!

3. ETF Buying. The Economic Times tell us that Precious Metals ETFs have been bulking up on over the past few weeks. This would explain the strong and sudden surge we saw two weeks ago. 10 Tonnes were added to the Streettracks Gold Fund (GLD), while 31 Tonnes were bought up by the iShares Silver Trust (SLV). If so the Silver should stabilize around 12.55, where it was stable two weeks ago.

4. A Worthless Monetary System. With the Bretton-Woods Agreement in 1971 the United States created, by all definitions, the Dollar as we know it – an entirely Fiat Currency unbacked by any physical commodity, metal or value held in esteem only with the faith of the American people. Thus we feel strongly, now more than ever, that wealth must be accounted for in ounces of metal rather than in dollars.

Gold has been gaining in value relative to many stock indexes as should continue doing so in the years coming.

Lesson #1: Gold remains a viable Safe-Haven.
Lesson #2: Count your wealth in ounces!
Lesson #3: Stay Long!



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