The slight dip in prices is an opportunity to buy gold.
Posted by Adam King on December 07, 2011
Eyes on Europe as Americans Buy Gold
December 7, 2011 – The slight dip in prices is an opportunity to buy gold. While the world waits and holds its breath watching Europe for the next development in the sovereign debt crisis, smart investors are making quiet moves now. Standard & Poor’s has effectively said it will downgrade the credit rating of all seventeen nations of the European Union, trashing Germany’s ideas for a Federalized Europe. No one yet knows how the evolution of the European crisis will affect world markets and this sentiment pervades the news.
With the ensnarement of extremely large banks like Societe Generale, UniCredit, and Dexia, most figured we would see the failure of another large European bank. Last week’s decision from the Federal Reserve, as well as the central banks of several other countries, may have effectively avoided that scenario. Forbes reported last week that a major European might have nearly failed last Tuesday.
This leaves open the question, however, of what happens next. The fundamentals of the European sovereign debt crisis have not been addressed, Germany’s bailout package has failed, and Europe cannot seem to muster, so far, a further bailout for Greece from a European country or a country abroad. Thus, the problems in Europe and in the Euro persist and continue and affect how investors buy gold.
The truth is almost any intervention or lack of intervention will probably benefit the price of gold. A further bailout in Europe will certainly raise the price of gold significantly and if there is no bailout investors will continue and increase a safe-haven flight to gold, which has in the third quarter of this year, partially, been responsible for an all time nominal high in the price of gold.
It does need to be stated that there is the possibility that the action we’re seeing now could be the beginning of a price correction. Due to the nature of the European sovereign debt crisis, it’s incredibly difficult to predict the factors that will emerge, especially from this week’s summit in Brussels. Some traders and analysts have commented that a correction, or significant move lower in price, is technically possible, but certainly not necessary.
Of course, if such a correction were to occur, investors would start buying gold as they did in September, which made the third quarter a record breaking period of time in which central banks bought gold at forty year highs. Moves lower in price are buying opportunities. Right now, every investor is looking for the right price to get in and buy gold.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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