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Historic Week for Gold as Fed Opts to Buy Toxic Securities Including Government Bonds

Commodities / Gold & Silver 2009 Mar 23, 2009 - 06:51 AM GMT

By: Mark_OByrne

Commodities Best Financial Markets Analysis ArticleIt was a historic week, with the Federal Reserve opting for the “nuclear option” of money creation on a trillion dollar scale. Gold and silver rose 2.7% and 4.5% respectively. The gains would have been much more but for an unusual and unexplained very sharp selloff in the precious metals immediately prior to the Federal Reserve’s dramatic and historic emergency announcement.


Commodities and stocks also reacted positively but less so and the major US indices finished the week marginally higher (DJIA +0.75%, S&P +1.6% and Nasdaq +1.8%).

The US Treasury’s latest toxic asset plan will cost another $1 trillion plus and US deficits are surging as Wall Street’s toxic losses are socialized and foisted on already hard pressed tax payers. The US budget deficit will hit $1.8trillion this year, a record amount, according to US Congress estimates. The CBO also predicted that President Obama's budget would result in a total deficit of $9.3tn over 2010-2019, worse than the White House had anticipated. The massive deficit forecasts come after President Obama's $3.55 trillion budget plan for the 2010 financial year

Bailouts, stimulus packages and deficit spending are now surging internationally (Japanese Prime Minister Taro Aso’s next stimulus package is set to exceed 10 trillion yen) and this will likely see not just the dollar but all fiat paper currencies falling against the finite currency and monetary asset that is gold.

While institutions and central banks are increasingly looking to gold’s safe haven attributes as portfolio insurance, retail investor sentiment remains lukewarm with only a minority of the investment public having any allocation to gold whatsoever and the vast majority of the mainstream media almost completely ignoring gold’s continuing outperformance of other assets and extremely strong fundamentals.

Media coverage of gold continues to be lukewarm and focusses on the fact that gold has not yet surpassed its record nominal high of $1,030/oz which is pointed out repeatedly.

What is rarely pointed out is that gold rose in nearly all currencies in 2007, in 2008 and is up some 8% in dollar terms (more in euros and sterling and far more in other smaller currencies many of which have fallen very sharply) so far in 2009 in stark contrast to equity markets (see Performance tables.

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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