The mad rush to gold yesterday was a story that transcended every market. In fact, it was the rush to gold that supported almost every market. The yellow metal was not following the dollar yesterday but it was the dollar that was moved by gold as it posted another record high and moved the rest of the world with it.
Gold drove the stock market and not the other way around, and it drove oil and grains as well. Don't believe the many media reports that said people bought gold because of the weak dollar because the truth is yesterday people sold the dollar because gold was strong. In fact as it made all time highs, the dollar index failed to take out last week's lows and is a sign that gold is leading this pack. Oil rallied not on Iranian war games but on the effect that gold had on the dollar. The stock market rallied in part because of strong gold stocks and oil stocks that were led higher by you guessed it -- gold. The move in this amazingly strong metal overshadowed everything and the alternative safe haven investment now seems to be, at least in the start of this volume deprived holiday week, the market that makes everything else move. Gold's shine is illuminating everything.
And why should it not? Gold is the perfect hedge for all that ails us. And it is the perfect gift for the holidays as well. The record high in gold represents so many of the fearful fundamentals that we are facing. Gold has become a monster and instead of being a following hedge instrument it has, at least for a day, been the key market driver. Gold is indeed going higher because of a weak dollar but it is more than that. It is going higher as people fear global economic collapse. They are buying gold because they fear a war in Iran. They are buying gold because they fear inflation. They are buying gold because global central banks are just printing money. They are buying gold because real interest rates have gone below zero. But yesterday they were buying gold because everyone else is buying gold. Fund managers and global central banks are piling in driving gold higher and higher. Gold is not acting like a hedge against a currency but looks like it is re-establishing itself as the one true global currency.
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