-- Posted Thursday, 24 July 2008 | Digg This Article
| Source: GoldSeek.com
By: Peter J. Cooper
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 Its 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.
By: Peter J. Cooper, http://www.arabianmoney.net
