|
We have yet to complete two
months of 2011 and so far we have already seen several attempted revolutions
in Middle Eastern countries, with so far two of them successful.
All of them have been unexpected and have caught the world by
surprise. We are on the brink of the next successful
revolution [Libya] disrupting the oil market and taking prices so high that
we are likely to see them negatively impact growth in the developed
world. The prospect of the dreaded, “double-dip”
recession is now back on our screens. Should food inflation
continue to hurt the entire global economy, then words like
‘stagflation’ and ‘depression’ will reappear in much
of the financial world. With developed world recoveries still
tenuous at best and weakened from nearly four years of financial crises,
there is little capacity to absorb this new threat. If it does
come about, then the strength to resist yet another one of the many potential
crises maturing in the last few years will not be there. Our
previous articles on the ‘validity of technical analysis in gold and
silver markets’ have already proved correct and are hopefully prompting
investors to reassess their viewpoints on gold and particularly silver.
[Subscribers who wish to access these two articles please contact us through
our website www.GoldForecaster.com ] So how should
we look at gold and silver now?
Reflections on what could happen
We are living in a world of
consequences, all of them unforeseen, yet caused by the faulty structure of
the financial world laid down decades ago. The ‘credit
crunch’ that rippled into the banking crisis, then the sovereign debt
crisis was a reflection of greed and the ‘live now, pay later’
way of life in the developed world. Each of the consequences of
every stage of these crises was unforeseen. Yet each was a
consequence of the sanctioning of debt leverage in all walks of financial
life.
Energy prices are much higher than
pre-credit crunch levels and expected to move higher. At the
time, much was written about ensuring that oil supplies needed to accommodate
both the developed world and the rapidly emerging Asian world, which
accounted for half the world’s population. Have oil
supplies been expanded to accommodate such Asian growth? No they
haven’t! So there is an oil crisis in the pipeline.
The governments of the oil producing Middle East have long been secured by
the main developed world powers to protect the vital interest of oil
supplies. The fact that they were corrupt and kept their own
people in poverty was ignored. It was a matter of time before
that crisis erupted. Food and energy inflation provided the
trigger. Will the new governments in these countries continue to
support the dollar pricing policies on oil or will they accept all currencies
and review their priorities concerning which customers to favor.
Will we see prices like $145 if Libya falls [they supply 2% of global oil
supplies]? If Bahrain falls, will it bring down the eastern area
of Saudi Arabia? If so, the shape of the oil world
will have to be re-sculptured. In turn, the economic future of
the developed and emerging world will change and cause pressures between the
different trading blocs that have not even been contemplated. [In
our series on “Financial Earthquakes’ featured in our Gold Forecaster
and Silver Forecaster newsletters we looked at several areas of potential,
global, economic, structural crises we might see in 2011] 2011 is
already the most dramatic year of this century and it still has ten months to
go.
Changes are a’ coming…..
It is in our nature to want our
national, political, financial and economic environments not to change,
leaving us to get on with our lives in a somewhat myopic way.
Change, when it does come, is surprising every time. It shouldn’t
be, but we tend to be so focused it always is. As with the credit
and subsequent crunches, we tend to feel everything will right itself
eventually, it’s just a case of waiting. Well it
hasn’t and here we are suffering the next set of structural crisis consequences.
So what should we do?
-
We, at
Gold Forecaster, have always followed a policy of extrapolation, taking the
events and structures of today and playing them forward to the
future. Hope is not part of this exercise, only realities that
are present and real now.
-
We do not wait
until statistics from the past confirm our viewpoint. We need to
be able to take the factors unwinding now, knowing that statistics will
confirm our conclusions later. This takes us to the front from
the back of the queue. For instance, we were confirming central
banks had turned sellers of gold nearly two years ago. It is now
being confirmed by economic statistics provided now.
-
We need the
correct perspective in order to weigh the different market influencing
factors in a balanced way. For instance, we don’t see gold
in a ‘bull’ market, but paper currencies in a ‘bear’
market after their ‘bull’ market last century from 1971.
-
We need to
accept that the gold and silver markets are now global markets.
Asian markets are the most robust in this regard so they are now in the
center of the market. They are investors who do not buy for
profit. In the developed world, investors buy for profit, but
are having a diminishing effect on the gold price itself. Yet
western investors continue to believe they are the main influence on the gold
price. They will sincerely believe that the level of U.S.
interest rates will dictate the future of gold prices. The
average Asian buyer doesn’t even know what these are. Yet,
it is the Asian buyer that is having and will have the greatest impact on the
gold price.
-
Our last two
articles on technical analysis highlighted the dwindling influence of
technical factors on the gold price too. The fundamentals are the
main influence with technical factors clarifying short-term moves.
-
We must accept
that the world financial climate has darkened and that the storms of
consequences are fundamentally destructive. Like adjusting to
winter from summer our expectation have to be tempered by this
reality. This allows us to protect ourselves from the coming
storms. Where we are optimistic, we have weighed the pertinent
realities before reaching that conclusion. We then act on
that. We may well find that the realities of crises have given us
tremendous opportunities both for profit and to protect those profits.
How will all this affect the gold and
silver markets?
The
fulcrum of the gold and silver markets at the moment remains rapidly growing
Asian demand. Following this is the inability of the supplies of
gold and silver to accommodate this growing demand. A factor that
will grow in the days to come will be the change in the developed world to
holding gold rather than selling it when prices indicate a
correction. The corrections we have seen in the last few years
have shortened and become shallower than the previous one. Just
as central banks in the developed world have stopped selling, [but not yet
turned to buying] so private investors are holding far longer than has been
the case in the past. Asian demand is totally different in that
investors there buy to hold as financial security, just as we used to buy
houses. We expect to see this trend start to grow in the west as
the developed world declines economically and the East rises.
Julian
D. W. Phillips
Gold/Silver Forecaster
– Global Watch
GoldForecaster.com
Is your
wealth effectively structured to avoid the pernicious effects of the
regulatory climate that we have moved into? It should be and we can help you
to do so professionally and within the law. Please contact us for any help
regarding this at: gold-authenticmoney@iafrica.com.
Subscribers
will be briefed again on this subject in our weekly newsletter. For our
regular weekly newsletter, please visit www.GoldForecaster.com
Please
subscribe to www.GoldForecaster.com for the
entire report.
|
