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-- Posted Monday, 5 July 2010 | Digg This Article | | Source: GoldSeek.com
You do not need to be a great stock market chartist to sense another big sell-off coming up. Markets started heading down in mid-May and have been on a down trend since then. The great bear market rally from last March is over. It lasted until the hot air from Wall Street could no longer deny the obvious truth that the recovery was just inventory rebuilding and the reality is a continued recession for most parts of the US economy, including such important drivers as housing and automobile sales. Stimulus wearing off Meantime the huge stimulus dose administered to the Chinese economy is wearing off and the Europeans have decided to cure their economic ailments by amputation. The impact of the slowdown from austerity in Europe alone dooms the world to a second dip into recession. Markets do not like what they see, and increasingly there is no reason to be optimistic about the outlook for profits and share prices. So this sell-off is likely to gain momentum and probably end in a selling climax in the traditionally bad month for stock markets of October. Now what does this mean for gold and silver? Deflation is not really the best environment for precious metals which are more usually seen as a hedge against deflation. In the 2008 market meltdown both gold and silver took a bashing, and fell 30 and 50 per cent respectively. Will it be any different this time? Could investors worry about staying in the US dollar and instead opt for precious metals as an alternative currency? There is logic in this as the austerity measures of the Europeans will likely strengthen their currencies even as they weaken their economies. That is dollar negative. However, in a big sell-off such considerations will be overwhelmed by the weight of selling. Almost certainly then gold and silver prices will be lower by a market bottom in October but perhaps will not suffer quite as much as in 2008. But what most people will then miss is that this will be the ideal moment to stock up on precious metals. Next stimulus package For what a big sell-off will also do is to concentrate the minds of US politicians on the next stimulus package. It will be bigger and bolder and precious metal prices will be quick to respond, as they did after March 2009. Moreover, the October stock market bottom is likely also to be an important top for the bond market. Thereafter bond auctions will not be so successful and the price of money will gradually rise. Once bond investors begin to buy precious metals instead that is when the big price rises will come, for the bond market is huge and the precious metals market tiny in comparison. You inject the latter into the former and prices will rocket. Sell precious metals short term, or hold if you are thinking long term, or trade out and back in again.
-- Posted Monday, 5 July 2010 | 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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How will gold and silver fare in another big sell-off?
