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Gold Safe Haven in the Worst Deflationary Slump since the 1930s

Commodities / Gold & Silver 2009 Mar 02, 2009 - 06:14 AM GMT

By: Mark_OByrne

Commodities Best Financial Markets Analysis ArticleGold rose sharply in Asia and was up by more than $10 per ounce before trading even commenced on the TOCOM – it rose from $941.60/oz to nearly $960/oz but has given up some of those gains in early trading in London and is now trading back at $950/oz.


Gold and silver fell over 5% and 9% last week after surging in the previous weeks and remain up nearly 8% and 17% so far in 2009. In the short term anything can happen in all of these markets and volatility remains very high in all markets. Correction and consolidation was expected and warned of. Those using derivatives and leveraged speculation continue to get their heads handed to them on a plate and will continue to do so. Passive long term investment through real diversification is essential today.

Stock markets are again taking a pounding today with Asian and European bourses down sharply (Nikkei -3.8%; FTSE -4%) on understandable concerns about the ruptured financial system and a global recession spanning the globe. HSBC will attempt to raise $12 billion in order to recapitalize and AIG is set to be quasi nationalised with another huge injection of US funds - a $30 billion rescue. In this climate it is hard to see gold falling much below these levels and gold should be supported between $900/oz and $930/oz.

Oracle of Omaha Warns of "Onslaught of Inflation"

Legendary investor, Warren Buffett has admitted making mistakes and warned that the US economy was in "shambles" this year and "probably well beyond". He said that reckless lending had caused the worst "freefall" he ever saw in the financial system which had made investors "bloodied and confused".

Mr Buffett also warned that the greater reliance on government aid was likely to lead to unwelcome and lasting consequences for the wider economy: "In poker terms, the [US] Treasury and the Fed have gone 'all in'. Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation."

Gold has proved itself a safe haven asset in the worst deflationary slump since the 1930s (as it did during the Great Depression). Should the 'Oracle of Omaha's' warnings of a vicious bout of inflation come to pass then we will likely see gold really come into its own and likely see it perform as it did in the 1970s when it rose from $35/oz to $200/oz, then fell to $100/oz consolidated and then surged to over $850/oz. As ever investments can fall as well as rise and important that investors do not have all their eggs in any one basket – including the gold basket.


By Mark O'Byrne, Executive Director

Gold Investments
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Ireland
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Gold and Silver Investments Limited
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EC3V 3ND
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Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
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.

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