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It was a great surprise to most that the price of gold fell after the European Central Bank, the Bank of Switzerland, and the Bank of England decided to make lending easier between themselves.

December 23, 2011 – Any recent talk out of analysts in the US of the gold market entering bear territory really doesn’t do justice to the price of gold today, which if you look at the fundamentals is actually performing quite well. The rumor mill has been running since the Federal Reserve decision to lower US dollar swap rates with central banks around the world on November 30 of 2011. Nobody knew at that time what exactly the effect of the Federal Reserve decision on the swap rate would have on world markets.

It was a great surprise to most that the price of gold fell after the European Central Bank, the Bank of Switzerland, and the Bank of England decided to make lending easier between themselves. The European crisis was largely to account for the bank decision that has caused a 15 percent drop in the price of gold. This dynamic has caused many analysts and investors to start calling the price of gold an indicator of a bear market.

However, the price of gold no more predicts a bear market than the Federal Reserve decision has provided a solution to the European debt problem. Technically, a downward correction in the precious metals consists of a 20 percent price change. This has happened three times since gold began its rise as a star performer in 2001. There was a 34 percent drop in the price of gold in 2008, with a significant decrease following the bankruptcy of Lehman Brothers.

Gold actually hit $681 an ounce at that time. I’m sure there were the typical analysts incorrectly calling the gold market at that time, as well. Perhaps they used words like, “barbaric.” However, if you were to have bought gold in 2008 at $681 an ounce and held it today at $1607.07 an ounce, you would agree quite wholly with the larger fundamentals of the gold market.

Gold is the star performer of this year and the best performing asset of this decade. While it may be down 15 percent on the month, gold is up roughly 14 percent from the 2010 settlement at $1,421.40. Each ounce of gold you bought in 2008 at $681 an ounce has earned you $1,000, just by being. The price of gold today is very clearly an indication of a market that has, continually, performed very well.

Kevin Johnson

Senior Staff Writer – GoldCoin.net

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