SHOULD WE BE INVESTING IN GOLD?
As the price of oil draws ever closer to the 100 US dollar-per-barrel mark, is our present (fiscal year 2007) global economy fast becoming into the economic climate that existed in 1980? Even though there are similarities like the Federal Reserve reigning in on credit and interest rates, the tumultuous political situations in the Middle East. The US$100 in 1980 is still higher in value after FTC algorithm-inflation-adjustments compared to US$100 circa-2007. Armed with this data, will the price of gold do a 1980 era repeat of reaching over the US$800 per-ounce price range?
With an aspect of Sharia Banking Laws fast becoming into vogue in Western financial sectors like the idea of financial institutions should only honor “concrete” or “tangible” forms of collateral, the lure of investing into precious metals -like gold- had recently become the hottest trend in high-yield investments. But the precious metals market is by no means strictly infallible and not immune from unlawful market manipulation. If anyone still remembers-or cares- about the “Hunt-silver debacle” will surely attest to this.
At the beginning of the 1970′s the Hunt brothers – heir to the multi-billion dollar fortune of Texas oil/petroleum tycoon H.L. Hunt- used their billions to purchase and hoard silver in an attempt to increase the price of silver to be comparable to that of gold. But near the end of March 1980, the Hunt brothers, along with a major Wall Street firm and U.S. securities and commodities markets came almost to the brink of financial disaster. Even though those were different times back then, if most of today’s current billionaires will do a “stunt” similar to what the Hunt brothers did -but to gold- the price of gold could reach US$10,000 per-ounce.
Our current allure of gold and its related retinue of precious metals, stemmed from the US sub-prime mortgage crisis that became news by the end of July 2007. During the succeeding months, the fallout of the US sub-prime mortgage crisis affected the global currency market – with their anchor – the US dollar weakened by inflation due to the Bush administrations current quagmire in Iraq. (At an average cost of US$1billion-per-week, it does seem like Uncle Sam is setting up a colony on a distant earth-like planet orbiting the star Alpha Centauri).
Bonds and conventional bank savings accounts quickly lost their appeal as inflation drained their purchasing power. So investors and their dogs everywhere quickly began to turn to the oldest stores of value they can find – gold and related precious metals.
Sources: Ringo Bonsubre
