Why Is Gold Dropping?

From Seeking Alpha

“O accursed hunger of gold, to what dost thou not compel human hearts!” – Virgil

"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." - Alan Greenspan

"Gold is not necessary. I have no interest in gold. We'll build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration. That's the bastion of money." - Adolf Hitler

"If you give a woman a gold ring, she's going to be very happy. If you give her one made of paper, I don't think you'll get very far." - Peter Schiff

"If you don't trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?" - Kenneth J. Gerbino

As 2011 comes to a close, gold bulls are spending more time on the defensive. It amazes us just how quickly some people seem to lose conviction in their investment ideas just because the price moves against you. Over the last month, for those who don’t follow such things, the price of gold has dropped from over $1700 at the end of November to a current price of roughly $1,535, and many newspapers and investment letters wondered aloud if gold’s “bubble” had burst. Against this backdrop, we thought we would use the last Bottom Line of 2011 to tell our readers why we think this price drop is a tremendous buying opportunity in the precious metals space, burst a few misconceptions about the metal, and remind people why they are in this trade (or should be!) in the first place. We’ve also included a couple of pretty charts.

The question most people are asking us these days is why is gold dropping? There are several culprits that we can identify, and probably many that we can’t. The first is the recent strength in the US dollar relative to the euro and other currencies. All else being equal, when the dollar goes up, dollar-denominated assets will go down.

http://seekingalpha.com/article/316889-why-is-gold-dropping

From a new source the Irish Independent via ZH. QB

Iceland fared better than us by letting its banks fail

By Thomas Molloy

Monday January 02 2012

ICELAND pursued better policies than Ireland or Latvia when the three countries' economies collapsed in 2007 because the Reykjavik government allowed banks to fail, according to a new report by the influential Bruegel think tank.

The report by economist Zsolt Darvas looked at the response of the three small and open economies. The three countries all initially allowed the credit boom to fuel property speculation and investment imbalances. As the crisis began, property prices fell, banks went bust and all three countries had to turn to the International Monetary Fund (IMF) for help.

The governments then introduced fiscal austerity programmes, structural reforms and reforms of the banking system. These similarities allow economists to compare the different responses in an attempt to determine what worked best.

"The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model can be the right choice," the report notes.

"The banking sector suffered meltdown in Iceland and foreign lenders to banks suffered massive losses. Yet, the crisis impact was much more benign in Iceland than Latvia."

http://www.independent.ie/business/irish/iceland-fared-better-than-us-by-letting-its-banks-fail-2977286.html