Gold and silver investors are coming through the normal summer lows in prices and there are some nice price gains already from these summer lows.
Autumn is traditionally the best season for precious metal prices. Gold hit an all-time high of $1,923 on Sept. 6 last year before a sharp correction. We could well see a similar pattern this year, only perhaps with even greater volatility.
Eurozone Debt Crisis
The reason? The 600 lb. gorilla sitting in the front room is the incredibly long and tedious euro-zone sovereign debt crisis, an immovable object of great size and ferocity.
It threatens a 2008-style global financial crisis this autumn once markets finally get it and realize that the central banks’ power to save the system is an illusion, like making a loud noise to frighten off a gorilla. Once that happens the precious metals will sell-off, but we may well have some excitement to the upside before then.
Why so? Partly because traders will seize the opportunity to trade the autumn cycle which is linked to religious festivals like Ramadan that ends in late August this year. There is also a feeling that while global financial markets are in danger, it is not imminent.
Gold and silver also look very oversold and due for a rebound, and traders are usually happy to oblige in raising prices in these circumstances, other things being equal as they usually are in August. Besides none of the good arguments for owning gold and silver have changed.
The talk about money printing as the salvation of the world and inflation as the next big thing, only gets louder. The pressure on the Germans to allow more inflation in the euro zone to save the euro is now intense. You push against a wall for long enough and it will fall over.
Every ratchet up in monetary easing, whether from the Fed, ECB, BoE, Bank of China or Bank of Japan is manna from heaven for precious metal investors. How can you possibly lose in an investment with all the central banks of the world on your side?
Ultimately perhaps not, but that does not protect you from volatility and it could be exceptionally high this autumn if we get a surge in precious metal prices followed by a global financial market crash.