Gold traders show record bullishness as eurozone sinks
Posted on 11 November 2011 with 2 comments from readers
Gold is the trade of choice as the eurozone flounders with 21 out of 22 traders surveyed by Bloomberg bullish about next week. That said gold and silver prices have fluctuated over the past week.
November 8th saw gold cross the $1,800 barrier before sinking $50. Silver prices around $35 have been strong, miles away from the pessimism of the summer months.
$2,000 soon?
Gold should reach $1,950 by the end of the first quarter, according to Bloomberg’s top 10-rated gold forecasters. Meanwhile, the prospect for share prices has dimmed with trade slowing all over the world, even in China.
Quoted companies are going to struggle to deliver the promised advance in profits next year as a recession or near recessionary climate closes in.
At the same time the bond market is clearly pressing for higher and higher interest rates. Bad news for bonds of course but also stocks and real estate.
The default position is gold and silver. There is also good reason to believe that the financial crisis will ultimately result in an inflationary printing of money as it did in the US and China three years ago.
Euro crisis
Once European authorities get their head around this we are going to get much higher prices for gold and silver. However, be weary of trying to time market cycles.
The short-term panel of Bloomberg experts is only right 58 per cent of the time, while over a three year time horizon ArabianMoney can boast 100 per cent accuracy (see the video here).
We can’t tell who will resign or surprise us next week. We can say that this crisis cannot be solved easily and every way you look is good for precious metals looking forward over the next two years. And we can see silver topping gold for performance (click here).
2 Comments posted by readers:
I am increasingly impressed by the argument that the euro will NOT collapse.
The decision to have the euro, ie currency union, was political. On the surface, this sounds a crazy idea especially to those people who do not live in continental Europe. However, after the Second World War and its Holocaust, the people of Europe said, “Never again!”
They weren’t just referring to the last war but ALL the wars that have taken place since the Reformation in the 16th century was countered by the Catholic church. Europe has been a killing ground since that time.
The fear, indeed the terror, that Europe will go back to killing each other is so great that the politicians in Germany in particular will do all they can to keep the single currency, on the grounds that it makes war between those nation states impossible.
The historically war-like nations in the eurozone have a central bank and a single currency. Now they have, I’ve been told, a Treasury in the EFSF. In the same way that the US has a treasury for fiscal policy and the FED for monetary policy, so Europe in the eurozone now has these two necessary institutions to keep the euro in existence.
If the PIIGS + France leave the eurozone, there will be sufficient northern countries left with monetary and fiscal union to stop war breaking out on that continent. In addition to Germany, which MUST be kept constrained by the euro from going to war again, there are Austria, Netherlands, Finland and, later on, perhaps Sweden and Norway.
The dictatorial, above-law European Stability Mechanism does away with democracy in favour of keeping the euro alive within the above countries at least. Democracy is not sacrosanct nor should it be if it must be lost in order to prevent another war in Europe.
However, I think an alternative belligerence will break out soon essentially between Israel and the West against Iran and Islamic militancy. What difference that will make to the continuation of the euro remains to be seen but, at least, democracy will be killed off if there is war in a globally bankrupt world.
You may want to read my comment on the ‘How Will Euro Crisis End’ article published here on November 8 for my thoughts on silver coins, versus gold, after a crash. Or not. (I’ll bet you never thought of what I discussed.)
Gold could be at $2,500 by Christmas 2012 because eventually, the ECB will be forced to print money, or watch Europe have a depression.
Bloomberg had an interesting article about the new Pacific trading block the USA is trying to put together to try and keep the Chinese from controlling the world using bribes and theft of intellectual property.
Meanwhile, Obama is blocking a pipeline from Canada, so China will get more of what little cheap oil remains. Whose side is he on?