Before it’s News
July 16, 2011
Gold is some 0.5% lower against the U.S. dollar and most currencies today but higher in Australian dollars as the Aussie fell on Australian and global economic growth concerns. Asian equity indices were mixed as are European indices.
Bond markets have seen subdued trading but Greek bonds are again under pressure and the Greek 10-year yield has risen to 17.37% in increasingly illiquid trade.
The dawning reality that the U.S. will be downgraded due to its appalling fiscal position led to new record nominal gold and silver prices yesterday.
Denial regarding the possibility of a U.S. default continues with some analysts denying that such an event is “possible”. Such an event is possible and it grows more likely by the day. US Federal Reserve Chairman Ben Bernanke warned overnight that a default on America’s debt will spark a major crisis and send shockwaves through the global economy.
“The Treasury security is viewed as the safest and most liquid security in the world, and the notion it would become suddenly unreliable and illiquid would throw shockwaves through the entire global financial system,” he told a congressional committee.
US CDS has broken out to the upside and there is the potential for sharp moves up here as was seen in the aftermath of the Lehman and global financial crisis.
The fundamentals for gold and silver could not be better as the outlook for most paper currencies and government paper (sovereign debt) is not good. The precious metals are again being seen as safe haven assets to protect from government profligacy and currency debasement. The risks of a “depression” and currency crises in Europe and the U.S. are rising and this is contributing to significant safe haven demand.
The fact that gold and silver have no counter party risk and cannot default and cannot be debased or printed into oblivion makes them crucial diversifications. Gold, global equities and AAA rated, short dated bonds remain the best way for investors to protect themselves from today’s growing sovereign debt and monetary risk.
Gold, silver, good equities and good bonds will be better than depreciating cash or currencies in the coming years. Real diversification will help protect preserve and grow wealth…
MARKET FLASH: GOLD PARABOLIC COMING THIS SUMMER
By Andrew McKillop
21st Century Wire
Originally published May 24, 2011
Question: Why could gold go parabolic?
Prices for the Yellow Metal have recently suffered, along with silver, from sudden investor retreat using rationales like ‘inflation is beaten’, the global economy is recovering and the US dollar is getting stronger. Against the overvalued euro, maybe, but against gold the US dollar, euro, yen and almost all other paper moneys only have one way to go: down.
Gold is a very special market and gold plays a key arbiter role in the unending attempt by the IMF and central banks to bolster and defend the value of “fiat moneys”. Their strategy is simple: push down the price of gold, anyway they can.
With the sudden and spectacular fall of the IMF’s Strauss-Kahn, 18 May, a large number of gold shuffling and swap operations between the IMF, central banks, the ultra-secret BIS and the world’s highly restricted number of authorized bullion banks could have been frozen in mid-air. When the balls hit the ground the collateral monetary damage could be a lot more interesting and much more powerful than what Strauss-Kahn did with his personal playthings in a Manhattan hotel room.
Strauss-Kahn’s sudden ouster comes at a key moment for its biggest debt bailout operations in favour of governments like that of Greece or Portugal, Ireland or Spain, the Baltic states, Iceland and others – who have to run a constant financing operation to save their national private banks, insurance companies and mortgage lenders. IMF austerity cures and forced firesale of government assets, under Strauss-Kahn or any body else, only makes the debt-load financing problem worse. To be sure, the IMF line is things have to get worse before they get better
Other so-called rich countries with similar crisis-level debt loads start with the USA, but at such fantastic rates of new financing need that, since late 2008, the USA is in permanent crisis territory…