What Crisis?

The Dubai World fear is dissolving like a sand castle on the seashore. After staying almost flat yesterday, gold futures made a new record high this morning: US$1199 and change for December delivery. Spot gold didn't quite make it that high, but it was close too. As I write this post, spot gold's at $1192.30.

This recovery can only fuel the optimism of gold bulls. Remember how scared people were? Remember the stories claiming that the much-waited-upon major correction was finally upon us? Remember the panic drop?

As it turns out, the panic was quickly reversed, and gold went into a holding pattern. One of the earmarks of an incipient bubble is prudent bears being made to look like fools. In a minor way, as Dubai World turned out to be a tempest in a teapot, we saw this pattern over the last several days. Gold's still oversold (as far as I know) but it snaps back as if it weren't.

Of course, pre-open stock futures are well up today too. And, the dollar is down. Gold keeps benefiting from being part of a "recovery trio," and will do so as long as it's widely believed that a strong U.S. dollar is an obstacle to U.S. recovery.