"...even as Greece has defaulted, the Euro has sunk against the Dollar, and the Chinese stock market has stumbled, gold [has] been sitting there like a pet rock."
Why have so many investors (as opposed to speculators) undertaken this act of faith?
"Prices should be discovered in the market, not administered by a government. Actually, we do not all so agree. In response to the incentives set before them, investors pursue the main chance. In the case of European sovereign debt, they continue to buy, more or less without regard to the underlying strength (or lack thereof) of debtor states. They buy because the ECB has pledged to buy."The phenomenon goes further – much further. Be it the US Federal Reserve, the People's Bank of China, the Bank of Japan or the ECB, central bankers' first financial-markets objective is not the integrity of prices and exchange rates. It is rather crisis prevention – to keep the bouncing bond and stock market balls moving in their sanctioned orbits. (For an individual to fix Libor is a crime. For a central bank to suppress European bond yields is an act of financial statesmanship.)"