Gold bugs need help from Fed - The Buzz

After prices fell 10 percent in December, many investors wondered if the bull market in gold was running out of steam. That was before Federal Reserve Chairman Ben Bernanke swooped in with a “red cape” and fired the bulls back up.

By Evariste Lefeuvre: Gold prices rebounded on the key support level at $1533, but gold bugs beware: this rebound may be short-lived. Gold is not a reliable safe haven, as the crisis cannot be easily subdued with injections of liquidity (with easing/stimulus measures from the ECB). Of course, gold has proven to be a strong hedge for investors benchmarked in USD, but the link with real rates is broken.

In a world in which one bank after another has scrambled to downgrade its outlook on gold, both before the recent bank CEO huddle with Obama last Thursday - the day the bottom fell out of the gold market - but especially after, when the real onslaught on gold truly started, it has been an outright blasphemy for the sellside to even hint at having a bullish outlook on gold.

Submitted by Martin Sibileau of A View from the Trenches blog, “…The genius of central bankers was not to forbid gold but to morph it into another fiat currency, by adding a credit multiplier to it. …”  

Over the past several months, the markets have tested investors’ conviction to gold. Since February, the price of the yellow metal has steadily stepped lower, rallying somewhat in May before falling again when Ben Bernanke disappointed by not providing the U.S. with more stimulus. Meanwhile, the dollar gained ground as global investors fled the euro.

Calafia Beach Pundit submits: Yesterday, gold bugs were celebrating as the price of gold rose by $30 dollars and €31 euros. Gold has now reached a new all-time against both currencies.

Hao Jin submits:In the last period of sharply rising prices (the late 1970s), Gold shot from $100 to $850.