Ghoulish Gold: Are You Sitting Comfortably?

Gold's up because of WWIII in Ukraine? Sell it, buy Greek bonds...

INSIDER secret, writes Adrian Ash at BullionVault. Financial news-stories are just that. A story, a narrative.

Read any report about stocks, bonds, gold or currencies, and you will in fact find someone trying to match event A with event B...where A is the move in an asset price but B is driving internet traffic.

"Ukraine tensions hit shares," said Reuters this Thursday. "Euro drops to two-week low."

"[US] Treasuries rose for a third day," Bloomberg added, "as political turmoil in Ukraine boosted demand for safer assets."

The aim? To make a sale (ie, capture a chunk of that internet traffic) the writer has to give the reader (or rather, their editor) the emotional comfort of living in a universe where everything fits, everything makes sense.

Too bad this universe includes people, let alone markets. We are rarely rational animals. Things rarely fit so well.

Oh sure, the latest whispers of WWIII blowing across Europe from the Black Sea have coincided with a drop in Western stock markets.

Just for the record, however, the S&P in New York stands pretty much at new all-time highs. Volatility in London's FTSE-100 just fell to a 1-month low, somewhere around half its daily average of the last 30 years.

And yes, the exit of elected despot Yanukovych...and now Russia's jet-fighter alert...also coincided with a rally in US Treasury bonds.

But UK gilts rallied faster, however, with the surge in prices driving yields 7 basis-points lower on Thursday morning alone.

And if February 2014 goes down as the month investors panicked over Ukraine's turmoil, then the biggest safe-haven of all would seem to be Greek government debt.

Yes, really. The yield offered to new buyers of Greece's 10-year bonds fell 1.3 percentage points this month. That suggests (on our maths at least) a price rise of 18% since the end of Jan.

Gold in contrast added 6% in Euro terms. Even silver managed only 12%.

Greek bonds it is then. The ultimate safe-haven for unceasing news in need of a financial punchline to Ukraine's all-too human threat of catastrophe.

Sincerely, let's hope we don't get to see how well Greek bonds or London shares hold up against gold if shooting breaks out on Ukraine's Russian border.

But journalism is, after all, only the first draft of history...a quick stab at hindsight even as events and prices keep moving.

True history, wise after the event, says investors always act too late when a true disaster gets ready to strike.

Should gold really start to move on news from Ukraine, as we noted of Syria last summer, it would suggest we're all in for a heap of trouble.