Monday, March 17, 2008
Regardless of gold’s short-term price swings – both up and down – as investors and speculators react to the unfolding credit crisis, one thing is certain: Down the road, six months or more, gold will benefit from the Federal Reserve running its printing press at high speed, hoping that easy money will solve the current crisis of confidence.
The Fed is trying to reassure financial markets that it stands ready to back up or bail out the big banks. But, so far, this has not worked – nor is it likely to as long as confidence is lacking in those at the nation’s economic helm and at the vulnerable banks and financial institutions.
The roots of today’s problem are years of excess, easy money, and lack of financial oversight. And now there is no easy way out.
Americans have been living beyond their means – as households and as a nation – for years, spending money we don’t have mostly for things we don’t need. Individually, we have been enjoying easy credit afforded us by the Fed and domestic lenders. As a nation, we have counted on the willingness of foreign central banks to finance our spending and our wars by accumulating more and more of our debt.
Printing more money may postpone the day of reckoning but won’t avoid it. This is what the U.S. central bank tried in the 1970s – but, in the end, we just had more inflation, higher interest rates, and a more painful economic adjustment.
Today, we see easy money cheapening the U.S. dollar as the exchange rate vis-à-vis the euro, for example, falls progressively to new historic lows. The flip side of this depreciating coin is higher prices for oil and agricultural commodities – making it more expensive for all of us to drive our cars, heat our homes and office buildings, and feed our families. These are the early signs of a more endemic inflation down the road
We expect the price of gold to continue moving higher with big swings – up and down – around a rising trend. A gain of another 10 or 20 percent in the months ahead seems increasingly likely. And, with the right confluence of economic and geopolitical developments we could see gold spike to US$1500 or US$2000 or even higher in the next few years.
Jeffrey Nichols
Managing Director
AMERICAN PRECIOUS METALS ADVISORS
Office: 914-737-6655 / cell: 914-907-2022 /
email: JNichols@MetalsAdvisors.com
Regardless of gold’s short-term price swings – both up and down – as investors and speculators react to the unfolding credit crisis, one thing is certain: Down the road, six months or more, gold will benefit from the Federal Reserve running its printing press at high speed, hoping that easy money will solve the current crisis of confidence.
The Fed is trying to reassure financial markets that it stands ready to back up or bail out the big banks. But, so far, this has not worked – nor is it likely to as long as confidence is lacking in those at the nation’s economic helm and at the vulnerable banks and financial institutions.
The roots of today’s problem are years of excess, easy money, and lack of financial oversight. And now there is no easy way out.
Americans have been living beyond their means – as households and as a nation – for years, spending money we don’t have mostly for things we don’t need. Individually, we have been enjoying easy credit afforded us by the Fed and domestic lenders. As a nation, we have counted on the willingness of foreign central banks to finance our spending and our wars by accumulating more and more of our debt.
Printing more money may postpone the day of reckoning but won’t avoid it. This is what the U.S. central bank tried in the 1970s – but, in the end, we just had more inflation, higher interest rates, and a more painful economic adjustment.
Today, we see easy money cheapening the U.S. dollar as the exchange rate vis-à-vis the euro, for example, falls progressively to new historic lows. The flip side of this depreciating coin is higher prices for oil and agricultural commodities – making it more expensive for all of us to drive our cars, heat our homes and office buildings, and feed our families. These are the early signs of a more endemic inflation down the road
We expect the price of gold to continue moving higher with big swings – up and down – around a rising trend. A gain of another 10 or 20 percent in the months ahead seems increasingly likely. And, with the right confluence of economic and geopolitical developments we could see gold spike to US$1500 or US$2000 or even higher in the next few years.
Jeffrey Nichols
Managing Director
AMERICAN PRECIOUS METALS ADVISORS
Office: 914-737-6655 / cell: 914-907-2022 /
email: JNichols@MetalsAdvisors.com
