-- Posted Thursday, 14 August 2008 | Digg This Article
| Source: GoldSeek.com
By: Peter J. Cooper
Gold and silver are likely to act more and more like a currency rather than metals with other uses from hereon. There will also be an increased decoupling from the euro and pound sterling which will go there own way against the dollar without influencing precious metal prices.
The painful mid-summer correction in precious metals appears to be over, and those who bought junior explorer shares at the depth of this panic have already been rewarded with large gains. However, there is still plenty of money to be made by buying the juniors as they remain at depressed prices relative to the metals.
Investors around the world are increasingly attracted to cash. That is logical in a world where shares look overvalued in a recessionary environment for profits, bonds are giving negative returns after inflation and real estate is still highly overvalued.
It is not logical, however, to buy US dollars. The systemic crisis in the US financial system has several more down legs to come. We know that typical financial crises last for about three years and we are only one year into this event.
The dollar may be on the rebound now, and possibly for this autumn but this rally will not last. Buying US stocks can only be a short term strategy and one doomed to failure, with a major bear market still to come.
That is why gold and silver remains the best investment opportunity, and the sell-off of mid-August gives a prime buying opportunity. The buyers of US stocks today are setting themselves up for big losses in the coming crash as the US economy is destined for even greater weakness in 2009 and profit expectations are still way too optimistic.
In an environment this bearish you can really only choose cash or precious metals for safety and treat the latter as currencies. Personally I prefer a currency outside the control of the US which is prone to devaluation and inflation. Gold and incredibly undervalued silver will rise to this challenge. The euro and pound also look losers.
Peter J. Cooper
http://arabianmoney.net/
-- Posted Thursday, 14 August 2008 | Digg This Article | Source: GoldSeek.com
