Why did Gold prices rise in US ?

Question

Why did Gold prices rise in US ? Please comment on this with reference to events on July 11, 2008. I basically want to know what were the main reasons that caused price of Gold to rise on this day in the US.

Answer 1

Reflect for a moment that the "Why" is always asserted after the fact. It is rarely, if ever, know in advance, otherwise we could all be rich very easily. Yet you place such ultimate importance and profundity on "Why."

What your question presumes, is that the answer to "Why" will somehow help you make better decisions in the future. This is impossible, since the future is unknown, no matter how many "why's" you assert before it.

If "why" is of such importance, why can't you get rich from trading the news? Because you can't trade in hindsight. Even if you did know why, price may react in the opposite direction next time.

Turn off the TV, it is only melodrama and entertainment, talking heads clamoring to explain why after the fact, or what might be.

The problem is, price movement is fluid, always in motion, quite unlike the highly structured events that most of us are accustomed to. In the market environment, the decisions that confront you are as endless as the price movements you intend to take advantage of. Here is an environment that offers complete freedom of expression combined with unlimited possibilities and unlimited risk. If you place in it a participant who is oblivious to the psychological conditions of unlimited loss (one who operates from a mental framework oriented toward external structure, constraints, and expectations, where almost all "why's" are known), then what you have is a formula for emotional and financial disaster.

Unfulfilled expectations create a conflict between a person's beliefs about the way things should be and the actual environmental conditions that don't match those beliefs. This conflict is expressed through our emotions in the form of pain that we generally label as stress, anxiety, confusion, and questions like "Why?."

People seem to avoid pain instinctively by building up mental defenses against the intrusion of environmental information that would confirm the existence of any conflict. These defenses consist of denials, rationalizations, and justifications - all of which will result in perceptual distortion.

"Perceptual distortion" occurs when our mental system automatically distorts environmental information by shaping and selectively excluding certain information to compensate for the conflict between what we expect and what the environment is offering us. This will be done in such a way that we will believe a shared reality exists between ourselves and the outside environment, thus avoiding any pain.

You are not sharing a reality with the markets, and you are also indulging yourself in an illusion, to the extent that you hide from the possibility of disappointment.

If the markets are doing something other than what you are allowing yourself to perceive (because some, if not most, of the information the markets have to offer won't validate what you want or hope), then something has to give. These distortions will continue until there is such a disparity between your acquired mindset and the conflicting market information that the mental defenses (illusions) will break down. This usually creates a state of shock, where you may wonder how things could get so bad so quickly.