why is gold down so much when this is a world wide economic problem. To say that the dollar is strong makes no sense to me as the problem is worldwide...could someone explain it or is there no logic as to why this is happening. tia
Hedge funds were holding ETF gold unleveraged as collateral for leverage oil positions. I'm sure the oil positions were profitable but the hedge funds are probably now out of oil...but they now face margin calls on positions in general. Also the hedge funds face redemptions. So the hedge funds are selling gold...and that makes a trend to further follow.
And money coming out of gold is going into the dollar...
But money coming into the dollar does not necessarily stay in the dollar. Well...look at a European stock fund for today.
Actually I was impressed by how gold was holding while oil was down. Well the logic was like...hedge fund gold was unleveraged while hedge fund oil was leveraged. But I went into the gold miner while looking at an hour old quote...and that was some hour.
Historically when there is some kind of global crisis the dollar is considered a safe haven. Many countries don't trust their own currency knowing that political unrest in the U.S. is unlikely. Buying U.S. debt is a perserver of assets. We are the world's anchor currency(for the time being). Things may change since we have saddled nations with some of our sub-prime mess.