Forget about the recent wobble in the gold market and the brief rebounds in the decline of stocks.
Posted by Adam King on September 07, 2011
Gold investment once again proves to be the only safe harbor.
September 07, 2011 – Forget about the recent wobble in the gold market and the brief rebounds in the decline of stocks. Gold has entered a “super-cycle” that “will end all the other major bull markets,” says Swiss asset manager Urs Gmuer. And in MarketWatch Michael Kahn warns that “a cyclical bear market has begun” in stocks.
The only thing keeping stocks afloat has been strong corporate profits, but companies have been sitting on the cash and not investing it into growth. American spending, however, is reaching its limits. Not only were there no new net jobs last month – and that is a strong contraction in a growing labor force – there was also a decline in wages.
Expectations are for a steep drop in third-quarter earnings for the S&P 500 and Credit Suisse equity strategist Douglas Cliggott predicts earnings will continue to fall throughout next year. “Even nuts and bolts chart reading is serving up bad news,” says Kahn. “The trend line that supported the bull market from its March 2009 origin has been soundly broken to the downside.”
Meanwhile real inflation is rapidly eroding what little discretionary funds Americans have left. Tom McClellan on businessinsider.com brings up an interesting twist on the CPI figures – the housing crisis is helping the government fudge its numbers.
While the government excludes necessities such as food and fuel from its reports, it conveniently includes housing in the headline CPI. Housing accounts for 42% of the index, and depressed housing prices significantly offset increases in everything else. Strip away the housing data and the government’s own slanted figures show inflation is running at 4.8%.
Lot’s of investors saw it coming late in May and frantically set out in search of shelter. The Swiss franc, the cornerstone of a stable and cautious economy, suddenly became very popular, and the price shot up nearly 17% in just two months. But the Swiss weren’t all too happy about foreign speculators having so much influence over their economy.
Sound as it was, the franc is still fiat money. The Swiss central bank had the treasury print up gobs of new bills, bringing the price escalation to a screeching halt. Now it says that it will hold the price to 1.2 euro, which should debunk the idea of currency as a safe haven once and for all.
But the crashing franc had a curious backlash – folks sold off gold to recoup the greenbacks they lost buying francs, causing gold to falter and the dollar to rise. Panicked investors do some pretty crazy things, but the effects never last.
With all of its rivals laid to waste, gold investment has once again proven to be the only safe harbor.
Senior Staff Writer – Certified Gold Exchange
US Gold Market