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-- Posted Sunday, 17 May 2009 | Digg This Article | | Source: GoldSeek.com
Gold closed the week at $931 and silver held steady at $14 an ounce. Investors did not know which way to jump this week, although equities closed lower for the first time in 10 weeks. That probably marks the top of the bear market rally. Markets generally soften and show a little volatility before turning down. There are, on balance, still far more reasons to be negative than positive about the outlook. Euro disaster Take the 3.8 per cent fall in first quarter German GDP, the worst slump since 1990, or the 4.4 per cent year-on-year contraction for the whole European Union. Nominal GDP in the US has fallen for two consecutive quarters for the first time in over 50 years. Russian Q1 GDP crashed 23 per cent, the worst figure for 15 years. Banking spreads like three-month Libor have come down from five per cent last autumn to one per cent. But there is the considerable risk of a European banking crisis brewing up which could easily reverse this expensively won progress. The stock market rally has been a self-generating piece of good news with little real substance. Banking profit recoveries in particular are a nonsense of accounting, while the outlook for bank profits going forward looks very grim. It would indeed be surprising if the massive government spending programs, lower oil prices and lower interest rates had not managed to produce some kind of break in the fall. But having dropped off the edge of a cliff last autumn global economies are clinging to a ledge, and most probably still have further to fall. Just because that fall will be somewhat less than the fall last autumn is not really much cause for celebration. An Abraaj Capital executive has commented that long-term investors might find value towards the end of 2009. That sounds realistic without being too definitive. Cash alternative In the meantime, there is a good argument for switching some cash holdings into precious metals while prices are at levels that can not hold for much longer. For investors who prefer to deal in certainties than hunting for green shoots of recovery, this is a solid choice. What we do have as a known-known is that governments are effectively printing money for the first time in decades, and we know that when this has happened in the past inflation has always followed. Gold is a currency with a fixed supply, and will appreciate, and silver prices generally follow at twice the rate of increase. This explains why precious metal prices are rising and should continue to do so as these hopeful green shoots turn out to be misplaced optimism.
-- Posted Sunday, 17 May 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Gold $931 and Solid, Green Shoots Fading Fast
