In an extreme credit crunch, leveraged purchases of gold cause forced sales, because any price correction triggers margin calls. As a result, gold can be very volatile - upward and downward - at the peak of a crisis.
Sentiment: NEGATIVE
Gold has intrinsic value. The problem with the dollar is it has no intrinsic value. And if the Federal Reserve is going to spend trillions of them to buy up all these bad mortgages and all other kinds of bad debt, the dollar is going to lose all of its value. Gold will store its value, and you'll always be able to buy more food with your gold.
Accordingly, when the supply of gold runs short, the security behind the notes is diminished, the loaning of notes is restricted or suspended, and the panic follows.
The rise in the price of gold is a sign that capitalism has stumbled.
A gold standard doesn't imply stability in the prices of the goods and services that people buy every day, it implies a stability in the price of gold itself.
The degree of leverage now being reversed is staggering, and the underlying global imbalances - notably between the savers and the spenders - will require long and painful adjustment.
At present, financial crises occur, chiefly because the paper currency is redeemable in gold only.
When you buy anything with lots of leverage, it does not require a whole lot to go wrong to lose it all.
Consumer banking - selling debt to middle class families - has been a gold mine.
What would a loss of confidence in the dollar actually look like? Gold going absolutely nuts.
If we did go into a recession, something that's always possible for the U.S. or Europe, we could lower interest rates and expand the money supply without worrying about the price of gold.