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-- Posted Monday, 3 August 2009 | Digg This Article | | Source: GoldSeek.com
With the S&P up 46 per cent from its March low, a typical 50 per cent retracement is almost complete ready for the next plunge lower in this bear market. Unless you are a born-again-bull or have shut yourself in a cupboard for the past two years I do not understand how anybody can see a further upside in markets at this point, the risk is all to the downside. At the same time the outlook for the US dollar is not good, even if a new market crash brings a short rally for the greenback. At the very least then hedging the dollar with a currency of fixed supply looks attractive. IMF dilemma That is where gold and silver come into play. You can inflate the money supply but not the gold supply, although with IMF gold sales that is exactly what the central banks are going to do. They will fail because the IMF does not hold enough gold to cause a serious price change, and might actually stimulate additional demand if this action is perceived as a desperate attempt to keep gold prices down because inflation looks inevitable. It is the same story for those who say silver is not a currency. Just take note each day that when the gold price goes up silver doubles that increase, and when gold goes down silver drops by double that percentage. The leverage is obvious, and as gold prices take off those who can not afford gold will buy silver. Also silver stocks are 100th the size of gold stocks so simple supply and demand will leverage the silver price up. Silver is money because of its link to gold, and look at this another way: could silver fall in price when gold is rising? Impossible. This year I have noted that the flat-earth, tree hugging investors have become a little tired of waiting for gold prices to go up. But the new kids on the block are the hedge funds like Paulson & Co (who tend to get their timing right, that is why they have made billions), and also the more humble retail investor, represented by the enigmatic publisher Rich Dad or the gold ATM machines in Germany. To my mind this is setting us up for a price spike, and actually it does not matter where the stock market goes this autumn. Inflation fears A rising bull market would give rise to fears about inflation from the massive stimulus packages – like that already evident courtesy of China’s $1 trillion sub-sub-prime lending program in the first half. That would send investors into gold and silver. A nasty little crash in October would send investors scurrying for safe haven assets in a renewed belief that the end of the world is coming. It would also mark a definite top for the bond market and investors would have no other alternative then except precious metals, fearing a surge in inflation from a second bailout package. So with gold and silver heads you win, and tails you win. That is why gold and silver look the only attractive investments out there now. You might get a chance to buy them a little cheaper before an autumn stock market event, but do not count on it!
-- Posted Monday, 3 August 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 and Silver Look the Only Attractive Investments
