The US debt crisis is far from over and this basing period in precious metals and commodities may turn out to be an exceptional buying opportunity as investors rotate from overbought US equities, treasuries and dollars into high quality wealth in the earth assets.
Investing, like life, is about managing expectations – even throughout gold’s decade-long rise, price action over the short term can go both ways. It helps to look at what happens after short-term drops.
Sellers hammered gold again this week on news from the Fed. The minutes from its latest FOMC meeting convinced traders the odds for a third round of quantitative easing are waning. This was the latest in a long line of QE3 scares.
As convincing as this rally has been I am confident this is an ending phase and not the start a new secular bull market. Actually the bear market began last year in May but was temporarily aborted by massive central bank printing. Let me explain.
If a failure occurs out in the real world, it has a very high chance of spreading across and through the other elements of the system. Contagion is the fear, as if in finally toppling, one plate will crash into its neighbor and set off a chain reaction of falling plates.
This morning’s opening bids showed a small recovery trying to get underway but gold only added $3.40 to start off the day at $1,678 while silver once again briefly turned negative and fell to $32.92 the ounce.
There was a time when politicians kissed babies to show they had the common touch and a real connection with ordinary folk. With the outcome of the US elections finely poised, gold and a return to a gold standard is seen as a potential vote-winner.
What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks? An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce.