Is The Global Political Environment Going To Spark New Gold Highs?

If you thought the rapid rise in gold was over, you may not want to set your predictions in stone just yet. In fact, you might soon be happy that you did not take your profits when gold peaked a few months ago. Events are brewing all over the world that point to a rapid rise to a new peak in the price of gold and other precious metals.

This is according to an article called “A New Contagion is Brewing” by Michael J. Kosares. You can find the original article on the USAGOLD.com website.

Any glance at the TV news should alarm you to brewing trouble in Syria because of the continuing revolt and insidious means that the current Syrian government is using to try to stop the revolutionaries. This is a very sticky problem for Western powers. While it is impossible to condone the measures that the current government has taken against its own citizens, it is unlikely that we will like any of the new contenders for power any better.

But the article points out that this might just be the tip of the iceberg when it comes to Asian economic and political woes. Many countries in what used to be called the “third world” are struggling with unstable currency and debt conditions. The current global economy is so interconnected that any crisis in Asia and other continents will certainly undermine the entire global economy.

The struggle to combat these economic woes is bound to affect everybody from the richest to the poorest. Many people will be forced to sell assets in order to survive these changes. There is no clear way to come out of this intact either. Caught between the choice between protecting currency and economic growth, choices are grim. One leads to hyperinflation, and the other could lead to “stagnation.” Neither are good for the value of the currency you have in your pocket, bank account, or market accounts.

Consider the example of India. This is a country that is developing rapidly, but also places a big emphasis on the intrinsic value of gold. The decline in the value of India’s currency, the rupee, has led to the rapid rise in the value of gold. Has gold suddenly become more intrinsically valuable? No, but the rupee’s value has declined.

It is true that India is an extreme example because this country tends to value gold as part of its society more than almost any other land on Earth. But this is a clear illustration of what can happen all over the world when currencies are devalued or mistrusted. Gold is regarded as a store of “value” in a way that paper or electronic never can be.

This is what has to be considered. When the value of gold increases in India, it increases everywhere. The higher demand for this precious metal takes supply out of the global market. No market exists in a local, state, or national vacuum these days. Increases prices for gold in Mumbai affect the price of gold in London, New York City, and Omaha too.

What does this all mean? It means that when your favorite financial analyst gets on TV and attributes inflation, an increased gold price, or even tighter credit to events in Syria or the rest of the Middle East, they are only telling you half of the story. Political strife always tends to lower stock prices and destabilize markets, but so do simple economic problems. Sometimes these two things are related, but sometimes they are not connected at all.

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