by Simon Black: If
You Haven't Bought Any Gold Yet…
There’s one question that I’ve been seeing over and over
for the last several weeks as the price of gold has taken out its
all-time highs and continued a nearly uninterrupted ascent: Should
I buy gold now?
It’s understandable, especially for people who don’t
own precious metals yet. Nobody wants to be the sucker who buys
gold at the top, only to watch it crater back to $1200 or below.
But here’s some food for thought…
The US dollar is shattering historic lows against currencies like
the Swiss franc, Australian dollar, and Singapore dollar. Any currency
that isn’t a complete disaster is now being viewed as a safe
haven. And the mainstream world is now, finally, waking up to the
reality that the United States might actually default.
Never mind that the government has been insolvent for years and
the evidence of such has been widely available to anyone willing
to look at basic facts. Literally, only in the last week have people
finally began to consider the possibility of a US default.
Here in Europe, the situation is arguably even worse. No one is
being shy about a default in Greece – it’s discussed openly
now by policymakers, and major financial institutions are preparing
for a restructuring. And with its public debt more than 120% of
GDP, Italy will not be far behind.
Governments no longer have the benefit of operating behind a curtain;
their financial imprudence and technical insolvencies are now under
the spotlight for all to see… and confidence is fading quickly.
The more people lose confidence in the dollar and euro, the more
they look for alternatives. Large institutions and money mangers
collectively control trillions of dollars within the financial system.
Unallocated capital – funds held as cash and not being actively
invested at the moment – must be held somehow, somewhere.
This is the chief reason why so many smaller currencies are surging.
Compared to the dollar and euro, the Swiss franc looks incredibly
safe, and money managers have a much higher degree of confidence
that their Swiss bonds will be repaid than they have in the US or
The more capital flows into these smaller currencies, the more
they’ll appreciate against the dollar and euro. It’s simple
matter of supply and demand – increased demand for the Swiss
franc coupled with excess supply of US dollars means a stronger
franc in US dollar terms.