Investors flee from risk and sell ... gold?

The breaking up of the carry trade in Yen and Swiss Francs has been the precursor of the flight to quality in government bonds and the dumping and ditching of precious metals.

An interesting occurance has been that the $ did not plunge as much as expected and it now seems prudent for investors to re-adjust their trading ranges in all investment classes.

I expect the $ to show the way in the next weeks and the bias will be downwards.

Oil is not a catalyst yet, but it could rebound and gold and silver will again start rallying.
Good luck.

The US market sold off last week, due to worries about an economic slowdown or even a recession (Greenspan). If the US economy is slowing down, then the risk of inflation is less. If the US economy is heading towards a recession, then forget about inflation. Neither of these scenarios is bullish for gold.

Money went into bonds last week.

International Institute of Management (IIM) published a research report addressing the U.S. economic risks for the next decade. The global flight from risk was forcasted in this report. The most interesting thing about the report is that all the warning signs listed in the paper are coming true, including this month's stock market meltdown, subprime pain, investment deficit and trade deficit report. The complete text of the report can be found on http://www.iim-edu.org/u.s.economyrisks/

What is disturbing about the subject is that few economists disagreed with the presidential state of economy speech on Jan 31st (citing strong Down Jones performance and economic growth). The author of the paper explains the interplay of U.S. and global economic forces in a detailed yet easy to understand logic for non-economists. According to the report, the worst thing that could happen to the U.S. economy is the loss of investor's confidence. Med Yones, the president of the research, links current economic challenges to globalization forces and government policies. He recommends unusual strategies to mitigate the risks.

The market is full of noise and conflicting reports on the outlook of the U.S. economy, this paper cuts through all of the noise and focuses on the big picture rather than short term stock market behavior. It's a sobering assessment of the future of U.S. socioeconomic health.

On March 11th, Reuters published the a story, citing the part of the report http://www.reuters.com/article/hotStocksNews/idUSN0925116620070311

Another supporting point of view can be found in an article written by John Freeland, PhD, Credit Card Nation - Should the Government Get Credit Counseling?
http://www.tpmcafe.com/blog/john_freeland/2007/mar/01/credit_card_nation_should_the_government_get_credit_counseling