-- Posted Monday, 29 October 2012 | | Disqus

Suddenly the calm is over and the storm is upon us, at least in the North West USA if not yet in financial markets. That said the trouble brewing in those markets looks about to turn into a once-in-100-year storm too.

US political instability is a frightening prospect but that looms large with a very close race for the White House and uncertainty over the composition of the legislature after the elections on November 6th. The automatic austerity of the US ‘fiscal cliff’ on January 1st is far from being automatically avoided and markets loathe this sort of uncertainty.

Debtors prison

At the same time the crisis in the eurozone is about to blow up again with Greece once more facing default and Spain on a knife-edge. Each time the eurozone crisis intensifies it gets bigger in size and the solutions look less realistic. But then as the US experience shows that is what borrowing more to meet problems caused by over borrowing does to an economy.

Asia is also no safe haven with Japan and China both facing economic crises, not unconnected to the downturn in global demand particularly in the eurozone. Suddenly the whole house of cards looks very vulnerable with the winds blowing hard from all angles. Hurricane Sandy is something of a metaphor for economic reality.

Now will gold and silver protect investors from this storm? Technical charts suggest extreme pressure in financial markets could drop gold to $1,620 an ounce and silver to around $28 but that is about it. Moreover, the Jim Sinclair thesis gives reason to expect a rapid recovery and then some (click here).

What Mr. Sinclair forsees, as one of the most celebrated bullion bankers of all time, is that the bullion banks will use this weakness in the gold and for that matter silver price to reverse out of their short positions and go fully long in the market. Why would they do that?

Bond market crash

It is simple enough. The next stage of the financial crisis just has to be a bond market crash and much higher global interest rates, and a flight to precious metals. The bullion banks know this and want to be there holding all the gold and silver when that happens.

Gold and silver will be the best asset a bank can have on its books when the paper house of cards comes crashing down. There will have to be a global reset for money and that reset will have to include precious metals to give it any chance of working successfully, that is to say restoring confidence.

You can if you like try to be immensely clever and exactly time this reversal but to be honest you are not likely to get this right unless you happen to work for one of the bullion banks. Just to buy and hold precious metals is probably the best thing any reasonable person can do. Get your marketing timing wrong and you will miss this historic opportunity for the sake of trying to squeeze out a little extra profit.

-- Posted Monday, 29 October 2012 | Digg This Article

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

© 1995 - 2019

Live GoldSeek Visitor Map | Disclaimer