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Regardless of what certain pundits and investors say, I believe gold will have a great run into the end of 2011. [Why?] Because I think a currency crisis is brewing worldwide, and gold will be a safe place to store value. The Euro and USD are fundamentally weak, and inflation is nearly out of control due to huge stimulus packages and low interest rates that aren’t helping struggling economies. Gold should be the crutch to lean on for a while. [Let me expand on the aforementioned reasons.] Words: 675
So says Eric Kelly (www.hedgefundlive.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Kelly goes on to say:
- The European debt crisis is far from over.
- The U.S. Dollar is not very appetizing.
- Italy, which holds monstrous amounts of debt compared to Greece, seems like it is ready to take the spotlight.
- The Euro will get smashed when the EU can no longer delay dealing with its problems.
- When funds exit the Euro and with the USD so unappealing, gold is the next logical safe place to store value.
- Inflation may become more than a lingering issue throughout the world and, while Bernanke has been able to maintain some control over the rate of change in goods and services, countries with huge GDPs such as China and Brazil are having trouble. Gold can be used to hedge against the inflation by investors.
- The Chinese have been encouraged by the government to buy gold for years, this will only spur more demand from one of the most populous countries on earth, as the inflation rate stays above 6.0%.
- Foreign governments and large financial institutions will most likely hold their gold positions or add, due to the currency problems in the near future stemming from the Euro and USD. Gold can be used as a currency, although it is a commodity, when fighting with inflation.
- Commodity price inflation (food and oil) should also continue to grow, gold will follow / lead, while currencies become less valuable comparatively; basically– if you can’t beat them, join them– buy gold.
- The problems faced by the U.S. government are not going to be an easy fix… [and] over the last few years it has been obvious that when investors are risk averse, the first choice is to buy gold. Just think, one more negative headline from Standard & Poor’s about the U.S. debt rating could bounce gold 75$/ounce in a day.
- If QE3 is coming, and some are expecting it this fall, then gold may be a safe vehicle to ride out the currency storm.
- Indians are one of the largest buyers of gold, and it is a well known fact that Gold performs well from September to December.
[As I said at the beginning of the article]…I think a currency crisis is brewing worldwide, and gold will be a safe place to store value. The Euro and USD are fundamentally weak, and inflation is nearly out of control due to huge stimulus packages and low interest rates that aren’t helping struggling economies. Gold should be the crutch to lean on for a while.
*http://seekingalpha.com/article/278946-gold-will-keep-cruising-as-currencies-come-under-pressure?source=email_macro_view
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