10 December 2014

Market Volatility Continues….

The volatility in the global markets is continuing this week as investors are reacting to collapsing stock markets in Greece and China. Gold’s role as a safe haven asset is playing out true to form as the yellow metal is up some $35 from Friday’s close. 

The biggest news of the day came from China where the Shanghai Composite Index plunged over 5%, which is the the biggest decline in 5 years. (Source: Business Insider 12/09/14) While the index is up some 39% since January, the dramatic decline is not a good sign of fundamental strength.

The nature in which prices have collapsed indicate the fragile confidence investors have in global stocks right now. Time will tell if this is the start of a more meaningful correction in China.

The Greek Plunge…

The other big news story of the day has been the selloff in the Greek stock market, which as of early afternoon on Monday was down over 10%. Yields on 3 year bonds have risen 118 basis points to 7.6%.

According to a story on Bloomberg, stocks fell after Prime Minister Antonis Samaras decided to bring forward the process of choosing a new head of state. (Source: Bloomberg 12/09/2014). Four-and-a-half years after Greece received a bailout it is still struggling to turn things around.

The Case for Higher Gold Prices

One could argue that the events playing out on the global stage right now are systemic and a result of too much debt and credit growth. Problems keep arising because printed money can only slow down the next crisis not prevent it.

What is impressive so far about Gold is how it is rallying in spite of lower commodity prices. Brent crude oil has fallen 40% since June and has hit a new 5 year low. (Source: Reuters 12/09/14). Falling commodity prices are signaling a slow down in global growth which is fueling deflationary concerns. Yet, despite this Gold has been holding its ground because of the uncertainty this is creating with investors.

While the Gold price will likely fluctuate as market volatility continues it is still the best asset to own given the current investment environment. If you are interested in buying Gold and Silver consider allocating your purchase over several months to protect yourself from the wild price swings.

Author: celticgold.eu

Older CelticGold Market Report 8th December 2014 Newer Gold and Silver Showing Resiliency