As I write this on Thursday morning, Gold is in a virtual freefall, dropping below $1400 an ounce for the first time in two years – Ben Bernanke’s statements at the FOMC meeting on Wednesday were, I think correctly, interpreted as a start to reduced Federal Reserve bond purchases and ultimate tightening in interest rates. The reaction has been swift: The Dow is off by close to 350 points in less than 24 hours, if the futures are correctly forecasting today’s action, 10-year treasuries are getting hammered, but perhaps most interestingly, Gold is by far the weakest of all. It seems the last bastion for economic diversification – one depended upon for the last 20 years as the protector of value against volatile ‘paper’ asset classes is finally releasing its grip of importance.
Yes, Gold is officially rolling over after 20 years.
What that means for oil is very important and specific. I have been a long-time proponent of hard assets as a diversifier for paper investment – although I’ve never understood the allure of the yellow metal and certainly never correctly traded it.
But I’ve done well with oil and there’s a reason I’ve found it more fathomable as a hard asset: you can burn it, and it will give you heat and energy – try that with a block of gold.
What’s occurred to me in the last several weeks as the FOMC rumor mill caused…