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Gold
has been shooting up this week, hitting one record high after another,
hovering around $1600. Recently, it sold off on signs a debt-ceiling deal may
soon be reached. Nevertheless, gold remains super strong.
This
U.S. debt standoff has been dominating the markets, along with almost daily
ups and downs in the Eurozone’s debt crisis. That’s especially
affected the precious metals markets.
ALL
ABOUT SAFETY
The
flight to safety has been the primary market mover and this is unlikely to
change in the weeks or months ahead. Sure, there will be short-term ups and
downs based on news of the day. But the safety issue is key
and it’s going to continue.
This will
keep upward pressure on the metals, especially gold since it’s the
world’s #1 safe haven. And with the debt battered world financial
situation increasingly dangerous and vulnerable, this balancing act will keep
investors on edge and quick to run for safety.
It’s
also an important reason why worldwide demand is growing so quickly. This too
is keeping a strong solid foundation under the gold price, boosting upward
pressure.
Plus,
the likelihood of the Fed enacting more stimulus measures to help the economy
is yet another very bullish factor. And Bernanke essentially said
they’re prepared to go.
The
threat of a possible downgrade to the U.S.’s credit rating, by the
S&P and Moody’s, heaped further pressure on Bernanke to “do
something.” Literally, the heat is on, and with the nearly 100 year old
AAA rating at risk, you can be sure the Fed will be quick to act.
The
same is true of the politicians. The warnings have been sounded around the
globe… The bottom line is, a default would be
“catastrophic,” adversely affecting the world markets and
economies, similar to what happened in 2008.
SILVER
SURGES TOO
This
all helped push silver to $40, while gold and silver shares moved up as well.
But, if a last minute budget deal is reached as we suspect, don’t be
surprised to see more short-term downward pressure.
Since
the crisis would be “resolved,” at least for the moment, tensions
would ease and the markets would likely relax, at least until the next crisis
takes center stage… And the way things are going,
that could happen in a matter of days.
All
factors considered, the fundamentals and the technicals
are, and will continue to be, super bullish. As you can see on the chart,
that’s been driving these markets up strongly since last year, with
silver and gold shares clearly outperforming gold.
Gold,
however, is now poised to outperform silver in the months ahead. In other
words, there’s a very good chance that gold will soon make up for lost
time. In other words, it’ll likely soon catch up to silver and gold
shares as it continues to head higher.
Mary Anne and
Pamela Aden
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