Sometimes, in some markets, it can be a difficult question as to when you should buy gold. Posted by James Randolph on December 02, 2011
How to Buy Gold While Rome is Burning
December 2, 2011 – Sometimes, in some markets, it can be a difficult question as to when you should buy gold. Life is peaceful; you have income, and simply want to maximize your investments. Then there are times when the house is burning, people are jumping out windows, and even your cat has taken off. There’s very little in between those two circumstances. This week the Federal Reserve has brokered a deal with major banks around the world for a “coordinated ease,” in the poetic words of Goldman Sachs. Effectively, this is being taken as a quantitative easing program and will debase the dollar, thereby boosting the price of gold.
Many analysts are drawing attention to the M2 money supply, which has shown a $500 billion increase since July. Whatever they’re doing, they’re printing money like mad. This most recent decision, which includes the Bank of Japan, the Bank of England, the Bank of Switzerland, and others, will apply a lower rate to dollar swaps beginning Monday, December 5, 2011. The purpose banks are doing this right now is to keep credit circulating. There was a story from Forbes that conjectured a “big European bank got close to failure last night,” which came out the same day the Fed announced the deal.
Echoes of 2008 may be sounding, but the response this time is occurring on balance sheets. The only predictable asset that has performed steadily and well, come to think of it, since 2008 has been gold. It is the best performing asset of the past twelve months. And thanks to the Federal Reserve’s new decision, whether they are attempting a back- door bailout of Europe or simply trying to save a couple European banks from failing until next week, we can be sure the price of gold will be rising again for the same reasons.
While some analysts and may be screaming Armageddon, reality is generally not quite as dire. Or cut and dry. As we’ve seen with TARP, QE, and all the other acronyms, it takes time for the system to absorb the changes. The effect on gold, however, is always the same. You cannot debase a currency without debasing it relative to gold. What the Federal Reserve and the other major banking institutions of the world have done this week is tantamount to debasing the dollar. Make no mistake about it; it is now time to buy gold.
Senior Staff Writer – Certified Gold Exchange