-- Posted Friday, 15 August 2008 | Digg This Article
| Source: GoldSeek.com
By: Peter J. Cooper
Massive currency intervention ahead of the US presidential election explains the dollar rally that has depressed precious metal prices over the past two weeks.
But all the intervention in the world can not compensate for a monetary system that is fundamentally flawed with huge counterparty risk in derivative products and diving into a recession. Consider the logic of the dollar rally, there is none really.
We hear that the EU was in negative GDP territory in Q2 and Q3 is looking worse, so the EU might beat the US into declariing a technical recession. The dollar rises, US exports become more expensive for sale into a declining EU market.
Now General Motors saw its US sales crash 20 per cent in the first half of 2008 and was saved by export sales. What happens when the US is still in recession and export markets collapse? There will be a double dip recession, and profits will come tumbling down. The stock market will tank. Interest rates will be cut. The dollar will decline again.
Is it more realistic to believe that the US is about to undergo a miraculous recovery? No it is about to undergo an election and certain parties want to win! The hoards of investors being attracted back into US stocks and the dollar are being set up for a mighty fall.
Banks will go bankrupt as the credit crunch takes another savage bite out of balance sheets. There will be a systemic run on the dollar. Meantime, Europe and the UK and other indebted countries like Australia will also suffer painfully long and difficult correction periods. Their stock markets will fall. Interest rates will be cut. Their currencies will devalue. Japan also looks none too healthy and China and India will be hit worst of all as overstretched emerging markets.
In this systemic failure, what asset class will offer protection? Step forward precious metals which will first be considered as a no-other-alternative strategy and then gain an upward momentum as more and more climb on to the same bandwagon for survival.
This is where the second, and final climatic phase of the current precious metals bull market will emerge from the shadows of today’s scandalous manipulation of currencies ahead of the US presidential election. Eventually there will be a spike to levels unimaginable today.
Or perhaps you will choose to believe the alternative of a rapid recovery in global economies and a stock market boom with strong currencies all round. But global credit markets are down, so that is just not going to happen anytime soon. The system is bust.
Protect your assets and go into precious metals while you still have time. The current setback is the dark before the dawn and anybody selling out now will bitterly regret both their loss today and their loss tomorrow.
Peter J. Cooper
http://arabianmoney.net/
-- Posted Friday, 15 August 2008 | Digg This Article | Source: GoldSeek.com
