The not-so safety of “safe haven” thinking

As the stock market continues its violent 400-point swings back and forth, one question floods the minds of investors across the country: Where is a secure place to park my money, besides the floor boards?

And, like a broken record, the conventional wisdom repeats, “Gold, gold, gold…”

News Flash: Over the past six months, the violent economic winds that left the entire U.S. housing and financial sectors in tatters ALSO flattened the precious metals “safe” haven into a pancake.

Case in point: From its March 17 two-decade peak, gold prices plummeted nearly 30% to end at a one-year low on September 11. During that time, the financial storm took no prisoners:

  • March: Bear Stearns’ bailout. April: The biggest first quarter revenue loss in Citigroup Inc.’s entire 196-year history and a 77% plunge in Bank of America profits.
  • July 14 to July 18: The third largest bank failure in U.S. history and bank run: IndyMac.
  • September 7 to September 9: $200 billion rescue of indebted mortgage giants Fannie Mae and Freddie Mac. And, the #4 investment bank Lehman Brothers suffers a 90% drop in its share price. Bankruptcy is inevitable

(Golden Opportunity In Gold: Right now, the September 23 Elliott Wave International’s Specialty Service Metal’s outlook reveals how high yellow metal prices are set to fly. Click here for up-to-the-minute GOLD analysis on all time frames.)

YET — on Monday September 22, as gold prices soared to a seven-week high, the mainstream experts pulled out the “safe haven” appeal card as if “flight to risk” is a new incentive.

We know better. In fact, the most recent uptrend in GOLD got started on September 11 — more than a week BEFORE American Insurance Group (AIG) went belly up AND the Bush Administration announced a $700 billion bailout for the ravaged financial market.

And, in anticipation of the market’s turn for the better, the September 10 Specialty Service Precious Metals Outlook went on high, bullish alert and wrote: “I think we are now likely at a crucial bottom. The [recent] low registered a second 300-minute Relative Strength Index divergence and could be an important downside completion.”

Don’t be lulled into a false sense of “safe haven” thinking. Get objective and original insight into the near- and long-term trend changes in store for Gold via the latest Specialty Service Metals Outlook. Start today.

Elliott Wave International