MANY ANALYSTS are talking of the end of the credit crunch, writes Julian Phillips of the Gold Forecaster [2].
Some say that the bull market in Gold has therefore suffered severe damage, which will affect its long-term prospects.
If we were to accept both these statements, then it would appear that the long-term uptrend in Gold Prices [3] is indeed. But are these statements acceptable? Do they reflect the true picture underlying the Gold Market? To get the proper perspective let's stand back and look at the big picture.
Gold Bull Market: Is the Credit Crunch Over?
Not according to the International Monetary Fund (IMF). It assessment is that potential losses as a result of the credit crisis could near $1 trillion all told. It also warns that further losses and write-downs on prime mortgages, commercial real estate, leveraged loans, and consumer finance are likely.
The IMF's Global Financial Stability report put worst-case credit market losses at $945bn as of mid-March, with more losses expected for months to come. The report also stressed the fact that the credit crisis was impacting the full spectrum of the financial market in one way or another, with losses distributed between banks, insurance companies, pension funds, hedge funds, and other investors.
[4]We note that credit card finance – alongside car finance bonds – has been included in the new range of assets acceptable to the US Federal Reserve as collateral for loans to US banks. That tells us the deeper losses in consumer credit are not over by a long shot.
Gold Bull Market: The US Trade Deficit
February saw the US record a trade deficit of $62.3 billion against a January deficit of $59bn. With oil prices now over $120 a barrel and Chinese imports still cheaper than local products, the prospects are for a worse annual trade deficit than ever before. And there is no real sign that this deficit is dropping.
With Opec talking of a potential oil price of $200 a barrel, something has to be done to stop more than a decline in the Dollar. A stop must be put to the massive global scramble for resources by a combination of the developed world and the emerging world, because prices will continue to rise until they are so high that some will have to do without.
This problem is about the massive rises in demand with far greater ones to come.
So are there solutions in the pipeline? It seems that the only solutions available to the authorities are existing market controls and proposed market controls on all types of markets, but not on a globally coordinated front. Unless there is global coordination such control will be completely inadequate.
Are you structured to avoid the pernicious effects of government controls and meddling? If not, and you'd like to learn more, please contact us through gold-authenticmoney@iafrica.com [5].
Because the actual prices of gold and silver could become simply academic in the coming scramble to own physical bullion, outright and outside the reach of politicians.