Precious metals crashed on Monday, gold falling 9% and silver falling 12%
What then occurred was this in the Major Equity Index
| Index | One-Day Performance (%) |
| SPDR S&P 500 Trust (NYSE:SPY) | -2.32 |
| Powershares QQQ Trust(NASDAQ:QQQ) | -1.97 |
| SPDR Dow Jones Industrial Average (NYSE:DIA) | -1.76 |
What do you make of the correlation between the fall in precious metals and the fall in the index?
Do you think that this could lead us into yet another financial crisis or is this just a phase?
One way Panos says we can avoid this potential crisis is to "use financial derivatives rather than traditional asset diversification." Do you think it's wise for people to begin to do this? Do you have any suggestions?
These related articles,
Gold Falls 5%, Silver 8% Monday Morning As Precious Metals Crash Continues
Gold Price Slumps 9%, Back Under $1,400
give some facts about the decline in precious metals over the past few days.
Using financial derivatives to solve this problem is too risky because they still aren't regulated. The lack of regulation on financial derivaties contributed to the "Great Recession" because investors abused them. Without regulation there is no way to stop investors from abusing them again. Yes, financial derivatives can help transfer risk but unless there is someone to monitor them they an be just as troublesome. I don't think the past correlation between precious metals and other forms of major equity means that there will DEFINITELY be another financial crisis. I think we still have time to make changes in our financial system that could prevent this but maybe I'm just being overly optimistic.
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DeleteAlso, even though the prices of precious metals are dropping, the demand for gold and silver coins isn't.
DeleteAt least that's what this article has convinced me =)
http://online.wsj.com/article/SB10001424127887324493704578428332095974800.html
anyone have any idea how that's even possible?
I don't think that just because precious metals are down that we're expected to be in for a larger financial crisis than 2008. I think that is really difficult to predict the market and that we'll be in a more stable state financially than we were in 2008. , if precious metals fall.
ReplyDeleteIn agreement with Jake, I feel that precious metals cant be the only indicator for a financial crisis being created that is bigger than the 2008 crisis. It may be a possible component, but I don't feel that the decline in metals is going to be the main factor of another crisis forming.
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