-- Posted Sunday, 25 August 2013 | | Disqus
Gold prices topped $1,400 at the end of last week and silver hit $24 an ounce as those predicting the end of the precious metals bull market increasingly looked about to be proven completely wrong for a 13th year.
Will gold and silver bugs find that their luck is in after all in 2013? There is still one more big test ahead this autumn unless ArabianMoney has got its reading of the tea leaves totally up the spout.
New financial crisis
We fully expect a major downturn in global financial markets. The optimistic chatter about recovery this summer is utterly laughable. A few flickers of life on the major indicators do not make a recovery. This is the end of the trend initiated by low interest rates, not the start of the much tougher life to follow under normalized rates.
Interest rates have actually just moved up by the most in the quickest period ever. If you don’t think that is going to have a follow through in terms of asset prices then you are not living on the same planet as ArabianMoney. US home sales are just the first to fall.
We agree with Mohamed El Erian of Pimco, the world’s largest bond fund, who sagely advises that the time to get out of stocks, bonds and real estate is now, not to wait around for the stampede to the exit that is coming very soon.
What will that mean for gold and silver prices? In a market sell-off the good is sold along with the bad to raise cash to meet the debt obligations that cascade in on leveraged investors as their asset backing crumbles in value.
In 2008 that took gold down to $700 from a peak of just over $1,000 and silver to just $9 an ounce from double that. The difference this time is that we have just seen an even larger correction in precious metal prices in percentage terms.
Retesting recent lows?
Could gold and silver retest those more recent lows in a big sell-off of global financial assets? It would certainly be remarkable if prices headed in the opposite direction. This would also be the last great buying opportunity of the bull market for precious metals.
For if you look back again to 2008 the rebound for gold and silver was sensational and very fast. Precious metals were by far the best buy of the global financial crisis.
The next issue of the ArabianMoney investment newsletter will look in depth at the best investment options for precious metals (subscribe here), not advice we can give away for free on this website.
-- Posted Sunday, 25 August 2013 | Digg This Article
| Source: GoldSeek.com
