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Source: Reuters -
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If a flight to gold is a gauge of market anxiety levels, then we could be in for a bit of a white knuckle ride on markets this month.
After a relatively calm few months the price of gold shot up
to
six month highs this week, almost $US1000 an
ounce.
Some reports I've seen suggest gold's move upward is partly due to
increased buying from the Chinese, while a weak dollar has also
been cited as a factor.
However other analysts such as Nigel Brunel at OM Financial are
also putting the spike down to market uncertainty and worry over
the sustainability of recent stock markets gains.
Investors are now apparently looking for safe havens to park their cash for a while and gold is traditionally seen as one of the best safe ports around.
Since the March 9 lows this year, markets around the world have
surged ahead very strongly with the broad gauge of US companies the
Standard & Poor's 500 - up about 50%.
However for many commentators these gains, while welcome, are not
yet quite believable given the state of some key economic
fundamentals.
Like unemployment. It is showing little sign of easing in the US, and that means consumer spending is likely to remain subdued.
Companies are also not exactly growing their revenue at the moment either with many recent profit results being driven by cost cutting measures.
The line I hear and read all too frequently at the moment is - "markets have got ahead of themselves".
In some ways it almost seems like September is being built up as a test for the market.
If it can manage its way through the month without a big correction then yes, maybe we can relax a little bit and start to accept that the gains in the last six months as being real.
Scepticism healthy
Personally I think scepticism over the rally this year is a healthy thing.
Yes, it's true the world economy is mending and things are looking a lot better than six months ago.
However there is still a long way to go.
And that was the feeling one got from listening to an interview with Standard & Poors' Chief Economist David Wyss on NZI Business this week.
He told NZI Business reporter Nadine Chalmers Ross that a correction in stocks was looming.
Still in saying all that, it's hard to imagine this September will be anything like September last year.
September 2008 was the eye of the storm of this financial crisis.
It was the month that saw the collapse of Lehman brothers and the biggest one day fall (778 points) on the Dow in two decades.
September 2008 was a stomach churning month where it felt like the world was collapsing.
One hopes to see those kinds of months only once in a life time.
Read more of Corin Dann's blogs
