Gold: The illusion of safe haven

Let us admit it!

There is no safe-haven in gold! It is just an illusion and one can argue that it is thoroughly inappropriate to term Gold a safe haven.

“What is safe haven after all? Safe haven is a synonym for stability. A commodity to be called safe haven, it should exhibit the least fluctuation. It should, ideally be like a horizontal line and when it goes skewed or when it changes the trajectory, there is always the possibility that safe haven is no more a safe haven. It is just another commodity. To call gold a safe haven is nursing a draconian illusion.”

Fluctuations do not make a safe haven a safe haven, concludes a resident analyst with Commodity Online.

In other words, a safe haven should have an independent status, the analyst concludes.

But is the analyst going overboard?

“Gold is not working as a safe haven these days, in fact it is working like any other commodities, and interestingly, with the Euro-zone crisis deepening, demand for US treasuries is increasing, resulting in a strong dollar.” says Renisha Chainani, Manager; Research, Edelweiss Comtrade Ltd.

The US treasuries have been considered to be the ultimate safe haven for the past 50-60 years and suddenly, it is as if countries across the world are realising this.

But how long?

“Many believe the recent strength in the US dollar is temporary because we have our own debt crisis at home to deal with. With the US total debt at all-time highs, and the spread between US GDP and total debt at all-time lows, Zero Hedge estimates that US debt will officially surpass GDP this Halloween. Considering this, the long-term picture in the US dollar is questionable at best.” says Eric McWhinnie in an article.

Historically, there have been safe havens; but only on a temporary basis. There could be stocks, there could be dollars, there could be Gold or even real estate assets. But they all rise, prosper and wither, only to give way to other 'safe havens'.

The myth of safe haven exists and it is what it is: a myth!

As published in: http://www.commodityonline.com/news/Gold-The-illusion-of-safe-haven-43162-3-1.html