Fear is coming back to the markets at present as the Greece situation unfolds. Below is the current snapshot of the DOW and S&P 500 futures market down 1.5% at present.
I had said in my last Current Thoughts written Thursday that China had a long way to go in taking over as a leading currency and Chinese stocks on Friday saw their biggest one day decline in several years falling 7.4%. As a result, over the weekend, the People’s Bank of China cut interest rates.
The two safe havens, the dollar and gold have benefited from this world stock market turmoil. The dollar is up over 96 again and gold is up $11 at present with silver up 20 cents. The main reason the dollar is doing so well is because of the issues with Greece and other debt laden European countries. I have said before I think the Euro and Dollar will be at par and we are presently at the 1.09 range.
We have been range bound for quite some time with gold so this move up doesn’t really excite me, but I do think we have a little more fear that has entered the picture with the Chinese stock market and the fact banks may not open along with the stock market in Greece. Bank holidays are used to help calm markets and prevent runs. Anyone who lives in Greece should have saw this coming and already made plans to hoard their wealth themselves rather than leave it in the hands of the government.
This fits in with the title of my next book (Illusions of Wealth) While many investors think they are wealthy because a piece of paper says they own something, whether a stock or at a bank, what control do you have over that wealth? Do you honestly believe that should a financial or economic crisis occur that you can get at your money? That’s a serious question that many who buy gold ask because they don’t trust the system to be in their best interest should the crisis finally hit our shores. That’s why you buy gold as insurance. Many are waking up in Greece tomorrow wishing they had more control of their wealth and owned some gold.
Below are the upcoming economic data to keep an eye on this week. Remember that we have a holiday and the markets will be closed on Friday.
For a good idea on what to expect, keep an eye on the VIX (volatility) index to see if fear may give gold a bigger boost this week. I would have to see gold move past $1,200 to get excited. I have bets out there that gold falls below $1,000 before it moves past $1,400. As much as I am a believe in gold, I have to see this final smackdown come first.
As the dollar keeps moving higher, I suspect it will still keep gold at bay for now. Whether you call it manipulation or something else, I see banks working together to keep the price down so as to not cause panic. A gold price shooting up would cause panic. They can’t have that. While I do believe at some point they can’t stop the price of gold from moving higher, right now we are getting a small taste of what’s to come when gold finally does take off and fear sets in across the world. But I do believe we need a little more patience. Greece should not be causing that much fear. There are 23 states in America that have a larger economy than Greece. Greece’s problem is it can’t devalue its currency and make their issues less of a concern at the expense of the wage earner. It’s Spain and Italy that will become the game changer down the road. Greece isn’t a big concern I don’t think, but as you can see, it is a main story the markets are trying to decipher. They won’t let it get out of hand, but I think will somehow figure out how to kick the can down the road once again. It’s all they know. Heck, we’re pretty good at it, right? Just look at that dollar strength and ignore the looming $20 trillion debt figure we’ll be hitting probably next year. 7.8 trillion in 7 years for the Obama administration. Makes Bush’s 4.4 trillion in 8 years look rather small. All is well! The democrats will turn it around! No, the republicans will turn it around. No, this is part of the “Illusion” dear readers.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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