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Fear of Severe Inflation Driving Investors into Gold

Commodities / Gold & Silver 2009 Apr 08, 2009 - 02:19 AM GMT

By: Mark_OByrne

Commodities Gold rose 1.2% yesterday from oversold levels (silver +0.9%) despite stock markets falling, the dollar strengthening and oil falling for a second day. The rally has continued in Asian and early European trading as equities are again under pressure and gold is again receiving a safe haven bid.


The shadow banking system’s huge and growing toxic debt (IMF revised upwards their estimates from $2 trillion to over $4 trillion) looks set to impede any progress in fixing the ruptured international financial system. Obviously, this has negative implications for the global economy and may lead to a new Depression. Gold’s wealth preservation attributes will continue to be sought after as our financial and economic ills look set to be prolonged.

There were some $43 trillion of credit default swaps (at year-end 2007) according to the Bank for International Settlements and total derivatives of over $500 trillion and if only a small percentage of these “financial weapons of mass destruction” go wrong or are marked down sharply then we will face the horrible vista of a systemic crash which would likely lead to a monetary crisis.

At the very least we face a severe global recession and the likelihood of severe inflation and stagflation in the coming years (once deflation abates). Soros warned of this yesterday and talked positively about gold which would do well in such a scenario.

Soros said “that's the fear that drives people into gold." Soros wouldn't say whether he's investing in or owns gold but certainly implied that gold is a safer and good bet. More explicitly, he agreed with the view there's a bubble in Treasuries that's likely to burst sooner rather than later. If even a very small amount of the capital in the Treasury and bond markets flow into the very small gold market, gold will rise very significantly in the coming month

By Mark O'Byrne, Executive Director

Gold Investments
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Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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