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Clear the Decks: Gold Is Coming Down!

So is it fun enough for you yet? Does the fall out from the mortgage meltdown that led to the world markets instability and stocks tumbling finally seem to hit home? It’s been a rough time in the markets lately, and while many people have found sanctuary in precious metals, even that stability may be ripped out from under investors this week. Commodities, led by gold and base metals, are set for one of their biggest weekly declines in decades and why? Because fears of global recession have widened and in spite of U.S. and European government’s bailout efforts, it’s not going to be pretty. The surge in the dollar against the euro and the pound put added pressure on investors to liquidate their positions.

Gold has always been the darling of many for its appeal as a safe-haven investment but now is headed for what many predict will be its steepest weekly decline in more than a quarter-century. In London, the issue is said to be the rising dollar and plunging equities which are curbing investor demand for the precious metal. Gold fell as much as 13% this week, the biggest drop since the week ended March 14, 1980. The FTSE 100 Index sank 9.1% in London this past week while the pound slid the most versus the dollar since 1971 after the UK economy shrank for the first time since 1992.

These are not good signs for investors, but what about that vaunted stability in gold?

At the close of the markets on October 24, 2008; gold for immediate delivery fell as much as $39.04, or 5.4%, to $682.41 an ounce, the lowest in over a year compared with intra-day prices. Gold futures for December dropped $18.70, or 2.6%, to $696 in electronic trading on the Comex division of the New York Mercantile Exchange.

And while gold has fallen, so has platinum. This metal declined $32.15, or 4%, to $778.35 an ounce, more than a four-year low. It’s futures in Tokyo fell 16% last week amid mounting concern that plunging auto sales would cut use of catalytic converters. Among other metals, silver for immediate delivery dropped as much as 99.75 cents, or 10%, to $8.6825 an ounce, the lowest since December 2005.

These are frightening times. Gold isn’t the safe haven that it was in the past, but at the end of the day, it can still be considered safer than many stocks. We have trying weeks and months ahead. And in the face of what’s expected ahead, gold and precious metals will be an interesting segment of the market, if you’ll watch it with me.

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