Gold, silver will rebound again on further financial troubles
Posted on 24 July 2008 with no comments from readers
A sharp fall in the oil price and a consequent recovery in the US dollar brought a sharp retrenchment in precious metal prices this week as gold approached the $1,000 barrier for a second time and silver closed on $20.
This is an excellent buying opportunity for anybody who missed out on earlier buying opportunities in this bull market. It can only be a matter of weeks or at most a couple of months before gold breaches $1,000 decisively and then heads to $1,200 before the end of the year.
Why can I be so confident? As Bill Clinton once argued ‘It’s the economy stupid!’ You would have to be a real fool to think the financial sector is out of the woods now and that all will be well.
The US government may agree a rapid bail out for Freddie Mac and Fannie Mae, the two mortgage underwriting agencies, but what comes next? If these agencies have gotten themselves into a mess what other disasters have yet to emerge? How much will it cost next time?
This autumn we are far more likely to see a series of banking failures in the US than a meaningful recovery. How can the banks recover while house prices are still falling and not showing any sign of bottoming out! In this climate a full scale Wall Street Crash is in prospect.
In a frenzied effort to support the economy the Fed will have to cut interest rates from two to one per cent, just as it did in the dot-com crash. That will send the dollar lower and gold and silver much higher.
Anybody who believes the current rally on Wall Street is anything except a brief trading window is stupid. Even a big downswing in oil prices will not be sufficient to prevent the financial crisis that is ongoing and barely one year into a three year cycle.
In that cycle gold and silver will be the winners – and virtually all other asset classes the losers. This last happened in the 1970s and we are seeing history repeat itself all over again.
no Comments posted by readers:
If the yield curve stays steep, and fed funds stay low or rise only modestly higher, banks will be awash in cash and get healthy fast. You’re seeing that happen already. I don’t think a big crash is in the cards as long as those conditions remain.
Share values are based on profits, profit multiples and the growth outlook – none look strong to me.
US financial stocks suffered their worst one-day fall since 2000 on Thursday, as investors’ recent optimism was hit by renewed fears over the health of Washington Mutual and weak housing data.
Interestingly the euro went to a two-week low and gold still picked up! These are not normal times.
This is the last opportunity to purchase PMs at basement prices!
Two More Banks Fail
By Damian Paletta
Word Count: 816
WASHINGTON — Federal regulators shut down two national banks late Friday in the latest chapter of the credit crisis, and the Federal Deposit Insurance Corp. successfully protected all depositors by selling the accounts to Mutual of Omaha Bank.
The Office of the Comptroller of the Currency, a division of the Treasury Department, revoked the charters of First National Bank of Nevada, based in Reno, Nev., and First Heritage Bank of Newport Beach, Calif. The FDIC was appointed receiver of both banks.
Technically, gold will fall a bit more towards the much-watched 200-day moving average. It will, as it’s done previously, ‘bounce’ of this indicator, at which point a buy can be entered into. Early August or thearabouts….