Adam Taggart
Precious metals have lagged in recent weeks, but revisiting the reasons for owning them reveals no cracks in the foundation. In fact, there are several new developments that indicate the gold and silver doldrums will soon be over.
We’ve got negative real interest rates, fiscal deficit spending, unserviceable sovereign debts, and loose (if not reckless) monetary policies, all while newly mined ounces are more expensive than ever because of reduced ore grades and higher costs for fuel and equipment.
Add to that list several new drivers: MF Global proving that client accounts can be looted; Cyprus proving that the banking system will make depositors pay for its mistakes; politicians calling for various wealth taxes to be levied on anyone with savings; and lastly a new secular change in rising interest rates that threatens to create havoc in world economies and financial markets across the world.
Those are the old reasons, but there are new and compelling arguments for precious metals, including: A seismic change in the commercial trader positions (returning to a bullish stance not seen since 2004); unprecedented retail investor appetite for bullion; accelerating East-to-West demand for physical gold and silver; continued accumulation by world central banks; and shockingly depleted Comex inventories available for delivery.
For all these reasons, precious metal investors should sleep well at night, secure that the foundational rationale for holding gold and silver remains intact.
Times like these are designed to wear you down and force weaker hands to capitulate before reversing. But the precious metals bull market remains intact, and the real price action has yet to come. There is increasing evidence that the next big upward reversal is near.
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