Goldman Sachs, the gold-diggers and the Icelandic volcano…what is driving the market now?
The Goldman Sachs and the SEC debriefing call scared the investors last week. We know that the market (and its speculators) is (at most) driven by fear and greed. And last Friday (16th April ’10) was one of those scaring days for most investors. The Dow Jones, Nasdaq, S&P500, Oil and Gold had a drop. The Dow Jones Industrial Average had a good fall with the publication of corruption scandals in the heavens of Goldman Sachs (following by GS shares slumping more than 12%).
It is also a case of volcanic ashes falling on Wall Street. Another source of disruption of the markets recently is the Icelandic volcano eruption which is costing the Airline companies that provide the Atlantic Ocean cross, a massive figure of $200 million dollars of revenue a day (hello short-sellers! there is a big opportunity here for a short-term downside…and I don’t think the Airlines are insured for ‘volcanic woes’. Watch for British Airways and American Airlines).
Matter of factly, natural causes promote fear and doubt, and the hurricanes season in US is yet about to start and ground natural gas and US oil prices and some commodities.
The gold was also affected. It had a 2.12% drop last Friday. But, shouldn’t the gold be rising apart the financial market as it has no (direct) correlation with any government and/or financial market?
That is an old logic and does not apply to the new markets era. Today the traders sentiment, including the gold traders, is illogic (fundamentally, given that the US dollar had an insignificant change, it wasn’t a currency issue towards the gold). So what is it then? Certainly, psychology.
And honestly, who cares? The Mr. Market, as gracefully referred by Benjamin Graham, couldn’t be careless.
The important lesson is to trade the facts unemotionally and this is good news for some ‘gold-diggers’.
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