Does US Want Markets To Crash? – May 31 2011 |
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This is why Gold is going up. Buying Gold and Krugerrands for investment is prudent as negative real investment returns drive Gold higher.
US wants market crash
We all know that QE2 expires at the end of June. As mentioned previously, in the absence of FED buying, the US needs bond sales to fund its deficits. The question is who’s going to buy if Pimco, China, Pension and Investment funds are no longer buying and the FED stops taking up the slack by buying 75%-80% of Treasuries when it runs out of QE2 money.
Maybe the US and, particularly the FED, want the US Markets to crash as this will result in a flight to the safety of Bonds, the Dollar, Gold maybe Silver. If the US markets commence correcting end June, it is highly likely that such a correction would last into late July/Early August (If it lasts longer it starts to look more like a full blown crash, which no one wants).
This means that the problem of funding deficits for the first few months post QE2 is resolved as Pension and Investment funds move out of equities back into the relative safety of Treasuries and probably ?Gold? Thereafter, the US deficit problem again rears its ugly head, which can be resolved in one of two ways. Either the US adopts a Prescriptive Assets strategy where it compels pension and investment funds to increase the percentage allocated to Bonds, or it adopts QE3.
However, the US wants positive economic growth and low interest rates leading into the November 2012 elections and growth will not be provided by prescriptive Bond purchases.
Therefore, it is more likely that the US will use the fear generated by the equity market crash and the prospect of a consequent economic slowdown to justify the resumption of QE3. Now it is widely acknowledged that QE2 fuelled the recent speculative boom in Commodities, Equities, Gold and Silver.
Furthermore, QE2 suppressed interest rates, which resulted in negative “Real” returns and negative “Real” returns coupled with excess “Fiat” money creation are the two absolutely fundamental drivers of every Gold boom. Therefore, the odds favour a resumption of QE’s and that, in turn, favours a resumption of the Equity Boom, sustained low interest rates and the perpetuation of the Gold/Silver boom. Remember, these are probable, not guaranteed scenarios and the timing is even more difficult to predict.
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Copyright:- Eelco Lodewijks
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How can investors in South Africa take advantage of the anticipated huge increases in the silver price i.e. how do we invest in silver?
Hi Gavin
It is more difficult in South Africa as we do not have a Silver Bullion Coin. The Silver Protea sells for Spot Silver + a huge %age. Gold Reef City Mint sells 1Kg bars and a host of medallions, but the price tends towards Spot Silver + 50%. We can sell you 10Kg bags of .999 Silver Granules at less than that, but these could be trickey to resell. The last alternative is to buy old Silver coins like Shillings, Sixpences and Tickeys. Please call the shop for more information on this option. Best regards. Eelco
Why is it advisable to save in gold than in currency?What is the assurance that it is the best option?
Jairos.
There are no guarantees in life. If you read Modern Fraud Money Explained on Why Gold is Rising tab, you would understand.
Gold is only good when they are printing money. Money is currently bad as they are printing it.
Regards
Eelco
Where can I buy a 1986 1/10 gold kaugerrand tcoin.
Hi Ross.
Sorry for the delay. The first question is do you want a proof coin or an ordinary bullion coin. Most dealers do not keep Krugerrands and fractions by years. I have a 1986 1/10th bullion coin – not a proof.
Regards
Eelco
What is the difference between a proof coin and a ordinary bullion coin?
If I were to buy a Kruger rand today, would it be a coin minted in 2011 or not necessarily?
Thank you.
Hi Ilze.
In my opinion a Proof KR is for tourists and gifts. The mintages are too high to make them rare – see the Valuing Coins report on our website. Therefore, I treat them as bullion coins and we do not trade them at a premium. I would buy ordinary Kruger coins for investment. The Mint sells proof KRs at a considerably higher price than dealers charge for bullion KRs, but dealers do not pay a premium when you try to sell them. We sell Proof Krugerrands for R100 more than bullion KRs – just because they are prettier.
Hope that answers your question.
Regards.
Eelco.