-- Posted Tuesday, 26 February 2013 | | Disqus

Just as the talk about gold’s death cross reached its height and Goldman Sachs said the yellow metal’s halcyon days might be over, the price has rebounded to almost $1,600 despite a big sell-off on Wall Street that could be expected to result in margin calls and gold selling.

The Chinese are the most probable buyers at these bargain prices. Gold guru Jim Sinclair unveiled these inscrutable folk a while back and this website has highlighted their plans to raise official gold buying beyond 1,000 tons over the next three years (click here).

Market anchor

That is a powerful anchor in any market and not one that investment banks like Goldman Sachs or Credit Suisse can do much to unnerve. Just to keep gold a constant two per cent of their $3.2 trillion reserves means buying more and more.

Why are they doing it? For the same reason that any long-term investor should hold gold. To protect against a declining dollar and inflation from central bank money printing.

The Fed’s at it. So is the Bank of Japan, Bank of England and the European Central Bank. The Peoples Republic of China knows all about liquidity management and did the largest stimulus package in history to offset the Great Recession. Even the Japanese prime minister finally gets it.

Its become a force of nature, a tide in the affairs of mankind. That is why over time you will not lose with gold and silver, though it may be a rough ride.

Capitulation?

Eventually we will see a capitulation spike in the price when hyperinflation and devaluation get totally out of hand. Before then there will be many attempts to reign back printing by the banks who know what they are doing is total folly.

The problem is that once you set off down this road there is no way back. Stop printing money and the music stops and you plunge into a deep recession. Inflation looks a small price to pay until it is too late.

That is why global central banks are the biggest buyers of gold of them all. They know the unintended consequences of their actions. Investors should be taking the same action or they will be wiped out in the end.

-- Posted Tuesday, 26 February 2013 | 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

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