Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19
Central Banks’ Gold Buying and Repatriation Spree - 28th Nov 19
Another Precious Metals’ Reversal Coming Right Up! - 28th Nov 19
Stock Market 100% Measured Moves May Signal A Top - 28th Nov 19
Don’t Look for Investing Advice in the Media - 28th Nov 19
Why You Should Buy Trailer Park Stocks - 28th Nov 19
Will YouGov General Election Forecast 2019 be as Wrong as their REAL Forecast was for 2017? - 28th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Is Europe Warming Up Gold for its Final Act?

Commodities / Gold and Silver 2011 Nov 05, 2011 - 02:53 AM GMT

By: Eric_McWhinnie

Commodities

On Tuesday, Greek Prime Minister George Papandreou surprised European leaders when he called for a referendum on the new aid package for Greece.  Since then, the referendum has already been cancelled.  It was the latest drop in the roller coaster ride that’s called Europe.  Concerns continue to mount on how Europe to fix Greece, and after that Italy.  Unfortunately, between all the headlines and rumors concerning Europe, nothing has really changed.  Europe is in a world of hurt that will lead to either a total overhaul of the financial system, or more money printing.  Considering gold futures hit a six-week high at $1,765 on Thursday, precious metal investors are preparing for the latter.


Currently, it appears that officials are content with a temporary solution that will extend the status quo.  This will result in more bailouts and money printing.  The EFSF, which was hailed as the solution to fix the sovereign debt crisis, still remains unfunded.  German Chancellor Merkel says hardly any countries in the G20 have said they will participate in the EFSF.  In addition to more interest rate cuts from the ECB, Europe will turn to money printing to fund their so-called solution because no one is willing to cough up the money.  Even if the ECB does not print, it appears that the IMF is standing on call.  Dow Jones reports, “World leaders may mandate the International Monetary Policy to print more of its special currency to help solve the euro zone crisis, according to several people familiar with the matter.  Asking the IMF to print more of its Special Drawing rights, essentially an IOU that countries can exchange for cash, is one of the ways the Group 20 industrialized and developing countries is considering supplementing European efforts to stem a debt crisis threatening to spark a global financial meltdown and another recession.”  In the absence of aggressive debt write downs and restructuring for several countries, all roads lead to money printing.

Gold is viewed as a hedge against inflation, deflation, and any other monetary skeletons hiding in the economic closet.  Although gold is off its all-time record nominal high of $1,924, the case for higher gold prices almost seems bullet proof.  When the Federal Reserve first announced its QE1 program in late 2008, gold was near $800 per ounce.  Since then, gold has been pushed sharply higher by the Fed’s QE2, a record-low interest rate guarantee until at least mid-2013, and Operation Twist.  The Bank of England has also launched QE programs of their own.  When the euro zone receives a major bailout from the printing presses, it is likely to send gold prices well north of $2,000, and that’s just a baseline scenario.

The better scenario from the global debt crisis for gold investors is a worldwide race to devalue currencies, all in the name of sparking growth.  This is already playing out, as seen by the recent Japanese yen and Swiss franc intervention.  Another QE program from the Fed would also add fuel to the fire.  Considering the potential to have a world of fiat currencies devalue and lose confidence at a record pace, the upside potential in gold almost seems unlimited.  However, even the bull run of gold will eventually come to an end.  Jim Rogers explains, “Gold will move into a bubble eventually.  All long-term bull markets in every asset wind up in a bubble.”  Although he predicts a coming bubble, it could be years away.  “I fully expect a bubble.  Not for a few years but all bubbles look the same.  And I hope I’ll be smart enough to recognize the bubble when it comes,” he says.  According to John Williams, economist and editor of Shadowstats.com, for gold to reach its previous real inflation adjusted high, it would have to climb to about $7,000.  Mr. Williams measures inflation using the same formula from 1980, as opposed to the current Boskin Commision revised CPI formula.  Given that gold is now available on a global scale, and countries such as China and India are buying up the metal, gold may even overshoot Mr. Williams’ figure.

Although it may seem unlikely in the near future, gold investors still need to consider a worst case scenario for gold.  Such as scenario would include governments and central banks all over the world becoming responsible, which means painful spending cuts and wiping out debt.  At the current pace, this appears to be unlikely any time soon.  However, like Jim Rogers explained, gold will eventually end with a bubble.  Investors should prepare accordingly.

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules