Gold To Rebound As Global Economy Slips Into Recession

Gold To Rebound As Global Economy Slips Into Recession

$GLD

Gold will rebound as the global economy slips into recession and forces central banks to start up money printing presses like they have done since the Y 2007-2008 financial crisis.

“Gold is portable, divisible without losing its value, beautiful, extremely scarce, and virtually indestructible. It is simply the best form of money known to mankind,” one Gold Bug I read posted on his blog Wednesday. “The case for keeping your wealth in gold only becomes more bolstered when real interest rates are negative, faith in fiat currencies is crumbling, and nation states are insolvent.”

The US Fed will trigger the next global recession by initiating its 1st rate-hiking cycle since Y 2004 and popping bubbles in stocks, real estate, emerging markets and junk bonds. The central bank will then have to reverse course and revive its QE stimulus programs.

“The Fed will not be able to move very far off of the zero-bound range before the yield curve inverts and the U.S., and indeed the entire global economy, melts down,” he wrote. “This means real yields will become more negative, the USD will lose more of its purchasing power and economic instability will intensify over time: the Perfect Storm (fundamental backdrop) for rising Gold prices.”

Fed Chairwoman Janet Yellen in a speech last week said she expected the central bank would raise interest rates this year. The Fed has kept rates near Zero+% since Y 2008, when the global economy shrank the most since the Great Depression.

Gold more than 2X’d from a Y 2008 low of 712.50 to a record high at 1,923 oz in Y 2011 as central banks including the Fed tried to spur growth by cutting rates and rolling out QE programs. As the global economy recovered some, Gold fell about 43% to its closing price of 1,114.10 oz on Wednesday.

Gold and Gold miners will become more valuable as Fed policy loses effectiveness in stimulating growth.

Other investment strategists also recommend buying Gold while it’s out of favor among participants.

“Gold continues to be unloved, which I view as a reflection of investors’ complacency and/or ignorance of actual global monetary conditions,” said the Credit Strategist newsletter. “Those who know better should use current price weakness to add to their positions.”

“The dollar is the single most important financial instrument in the world for investors to monitor,” it said. “Unfortunately, along with all other fiat (paper) currencies, it continues to be actively debauched by central banks with no end in sight. For that reason, regardless of what happens, investors should continue to buy gold and save themselves.”

Stay tuned…

HeffX-LTN

Paul Ebeling

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