What Does the Week On Week Rise In Gold Indicate?

November 13, 2011 | By | Reply More

The steady rise in gold over the last four weeks is a symptom of the economic turmoil engulfing Europe and the possible knock on effects on the rest of the world, exacerbated by the imminent probability of steep inflation setting in before very long.

Under the influence of Germany, Europe had long resisted the temptation of printing excessive amounts of new paper Euros, unlike the United States and the UK, to name but two.

Now with Italy, the third largest industrial nation in Europe seemingly on the ropes, with Spain and France not far behind, the mountain of debt that these nations have run up is reaching such unmanageable proportions that the option of printing vast amounts of Euros is now likely to be embraced by Germany as a last resort, shades of the nineteen twenties not withstanding.

Gold Rise Poised for a Major Breakout

This present rise in the gold price makes us think that the metal is poised for a major break out, its behaviour suggests to us that it is like a coiled spring ready to burst out of its shackles.

It will not come as a surprise if our thoughts turn out to be correct as everywhere we turn we read of the continuing surge of physical buying by the emerging and oil rich nations and their populations, not forgetting far sighted westerners who are seeking to preserve their wealth as the economic tsunami gathers force. We doubt that even dyed in the wool contrarian investors would bet against gold reaching two thousand plus dollars an ounce in the not too distant future.

Stock Markets to Fall

Undoubtedly, as the European crises deepens, as is most likely, stock markets will fall leading to a surge in investors seeking liquidity. Human nature being what it is, the sale of assets showing a profit, such as gold and silver, will be the first on the chopping block, illogical as that may seem in the circumstances.

This is likely to be only a short term stutter but will offer a buying opportunity.

Unlikely Gold Sell Off

It is also a possibility, although unlikely as it will only represent a fraction of the debt, that Italy will be forced to sell off its substantial gold reserves, again leading to a short term pull back in the rising price of the yellow metal. Nevertheless in either event, the opportunist investor should take advantage.

Never a Borrower or a Lender Be!

On a final and personal note, where is the logic in trying to resolve a serious debt problem by running up even more borrowing. The excuse that it is a cure for halting unemployment, encouraging banks to support business (more debt down the line), sustaining growth and all the other platitudes we have been with fed with by our politicians and their acolytes, the bankers and Wall Street, has manifestly proven to be garbage.

Delaying the inevitable will only make the cutbacks and hardships that Westerners will ensue even more severe. Let Italy, Greece and any other countries whose leaders have run up unmanageable national debts in order to keep themselves in power and to hell with the consequences, declare, or be forced to declare, insolvency.

They can default on their loans after being kicked out of the Eurozone, leaving the bankers with the serious problems that they so thoroughly deserve. After all is said and done, it is the voters that bear the responsibility for being seduced by power hungry, greedy and immoral politicians and their equally corrupt backers. Now the voters can expect no more than they deserve.

Stay Long
Our advice to maintain at least some of the standards of living that we have become accustomed to is to buy physical gold (bullionvault stored in Zurich), never, under any circumstances be persuaded to go short gold or silver, follow the trend, buy the dips and keep out of debt.

Lest we forget, the establishment hates gold!

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