Ignore Gold Sell-Off Panic

Ignore Gold Sell-Off Panic
Posted by Brittany Stepniak – Wednesday, March 7th, 2012

Today (Wednesday, March 7, 2012) gold futures performed best based upon “growing optimism that the necessary bond swaps will occur to allow Greece to obtain another bailout. This has nudged the euro higher, pulling gold with it, traders said.”

Last Wednesday, Ben Bernanke single-handedly pulled gold prices down sharply by shying away from further rounds of quantitative easing.

Yesterday, April gold plummeted to the lowest level we’ve seen since late January…

However, investors are encouraged to stay calm and refrain from over-reacting in a sell-off panic.

It’s a proven psychological fact that people almost always seek stable money. Nearly 100% of the time, the only secure choice is gold or silver.

Why should this time be any different?

According to precious metals commentator David Levenstein, investors seem to be ignoring what’s truly at the center of the global markets right now: the Greek debt crisis — not Ben Bernanke and the Fed.

In order for Greece to avoid a default, the largest debt restructuring deal in recent history must take place:

… investors who own bonds governed by Greek law, which covers 92% of bonds outstanding will incur a loss of as much as 75%, thereby erasing some 107 billion euros ($144 billion) of Greek debt from its total debt burden of 373 billion euros ($496 billion).

The losses of these bond holders which include banks, hedge funds, financial institutions and private investors may be used as a reminder to potential investors that holding sovereign debt is not necessarily a sure and safe thing. In 2006 Iraq imposed an 89% loss on its bondholders in 2005 investors lost 76.8%.

A crucial element for investors to come to terms with is the idea that investing is not merely about looking for high yields.

Rather, it’s more important to pay attention to the bigger picture and know the fundamentals of your investment.

Gold’s fundamentals make it stronger and less volatile than other assets, regardless of external world events.

The yellow metal will always maintain its reputation as a stable hedge against inflation, because all governments end up abusing their money-issuing privileges eventually…

And when that occurs, people almost always go for gold.

The price dips merely provide a solid opportunity for investors to pick up more of the yellow metal safe-haven at a cheaper rate.

This morning at 11:53 (EST), April gold was up $13.50 to $1,685.60 on the Comex in New York, a 0.8% increase.

Following suit, May’s silver climbed up by 60.7 cents to $33.90 per ounce — a 1.8% increase.

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