It seems accepted that investing in gold is now being seen as an alternative to equities. As equity markets have moved up or down so the EURO/USD currency exchange rate has reflected the price movement that is when the market moves up so the Euro strengthens against the dollar and vice versa.

The effect is that as equities move up so does the Euro resulting in a weakening gold price. Equities down, Euro weakens, gold moves up.

This price action seems at odds with the traditional thinking that a weakening dollar will be reflected in a strengthening gold price but there is no denying that recently this has not been the case.

On consideration we think that due to the volatility and uncertainty surrounding the equity markets that this current situation is an anomaly and will be short term. It seems that there are many clinging to their optimistic hopes for the market, bottom fishing for perceived bargains on the premise that there is no worse financial news yet to come.

We hope that they are correct but have serious doubts. In the meantime a, so far, limited sell off in gold this week may be accounted for by investors and speculators seeking to take advantage of their expectations of a continuing strengthening equity market.

We repeat that we do not think that this will happen but for the astute short-term speculator these conditions promise to be a golden scenario.

Keep it cool, in these dangerous times the temptation to risk any more than you can easily afford should be strongly resisted. Get rich quick thinking more often than not leads investors and speculators alike into troubled waters unless they are very experienced.

If you cannot resist the temptation to buy a stock you think has promise for the future at a bargain price consider taking out insurance against a wipe out by selling a covered call option. 

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