Is the Double Dip Upon us? Markets, Gold and Commodities Plunge
Source: Lawrence Williams, Mineweb (2/5/10)
The latest falls in the markets and gold and commodity prices are raising the fear factor among investors as worries about a double dip recession resurface.
The Trichet statement hit the Euro hard leading to a sharp fall against the dollar as investors suddenly saw the dollar as being strong vis-a-vis other currencies and perhaps likely to stay that way for a period. Dollar strength tends to mean gold weakness and as the Euro plunged, gold crashed with it. The spectre of continuing global weakness though hit stock markets in general right across the world - and coupled with recent Chinese moves to tighten domestic availability of easy money there is an element of fear developing in the investment sector.
The question is, though, is this the indication of the onset of a double dip in financial markets as some of the gloom merchants have been predicting? If so what does this mean for gold and commodities?
... What is apparent from the latest market slump, though, is that we are far from out of the woods yet with respect to the global downturn, despite politicians and some economists trying to talk the economy up at every available opportunity - perhaps excluding Jean Claude Trichet! History shows us that gold tends to perform better than most other assets under such circumstances so even if gold and precious metals fall, other sectors may well do worse.