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-- Posted Wednesday, 15 October 2008 | Digg This Article | Source: GoldSeek.com

GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR

Gold and silver were tracking the US dollar and crude oil for once yesterday. The bank rescue package, bank deposit guarantees and buying stakes in banks by central banks are now over. What next is the big thing for the investor? Years of financial mess cannot be flushed out of the system in a few days. Results of the current measures will take time.

Why I am I bullish on gold? It is mainly due to the near collapse of the Bretton woods system.

n       During the second world war, international trade suffered with runaway inflation and devaluation of currencies. A need was felt to bring out a new monetary system that would be stable and conducive to international trade. The process was started in 1943 by Britain and the US and finally in July 1944 the American proposal was accepted at the Bretton Woods conference. The new system aimed to bring about convertibility of all currencies, eliminate exchange controls and establish an international monetary system with stable exchange rates. The IMF was set up in 1946 under the Bretton Woods agreement and the new exchange rate system also came to be known as the Bretton Woods system.

n       Under the Bretton Woods system, member countries were required to fix parities of their currencies to gold or the US dollar and ensure that rates did not fluctuate beyond 1% of the level fixed. It was also agreed that no country would effect a change in the parity without the prior approval of the IMF.

Most of the currencies fix parities to the US dollar. The purchasing power of the US dollar is falling with passing of each year. There is no single currency to replace the US dollar. The replacement for the US dollar will be a combination of currencies and gold. This will not happen now, it will happen ten to fifteen years from now. Till then the purchasing power of all the currencies (including the US dollar) will fall.

COMEX SILVER DECEMBER

If silver fails to break $1250 in the rest of October then it will fall to $888 and $800. This is just the technical picture.

Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees  have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice.Prepared By Chintan Karnani. Website www.insigniaconsultants.in

-- Posted Wednesday, 15 October 2008 | Digg This Article | Source: GoldSeek.com

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