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US Mint sold more silver Eagles in the first ten business days of 2012 than they sold in all but two of the entire months of 2011.

January 17, 2012 – France is downgraded from AAA status, German business leaders are calling time to exit the Euro, and the head of sovereign ratings at S&P stating he believes Greece will default shortly as the buying of silver and gold is occurring at record rates. Gold is up 5% so far this year, making it a pretty good investment for two weeks, and the US Mint sold more silver Eagles in the first ten business days of 2012 than they sold in all but two of the entire months of 2011. The problems of the world economy, particularly the world economy as it is exposed to the European problem, is clearly affecting the precious metals right now.

Of particular interest is the “backdoor monetization,” as Dr. Marc Faber puts it, of the ECB. He is referring in this case partially to the decision in early December by the Federal Reserve, the Bank of England, the Bank of Japan, and several other powerful central banks to artificially lower the swap rate of US dollars, essentially making the cost of borrowing between banks free. Faber also believes that the ECB has already begun a program of debt-monetization through programs with other names, though as yet it is only an analysis. Like most fiscal policy we have seen in the past three to four years, this and others have not stopped a chain of events that today led to the downgrading of the French economy by S&P or the official Spanish unemployment rate to reach a staggering 23 percent.

In fact, there has been little gain from fiscal policy in the last few years except in the precious metals markets. Gold was up 10.16 percent last year, despite the correction occurring in December. Gold was up 24 percent in 2011. Gold is up 5 percent so far this year and we’re only halfway through January. It’s a fundamental fact that messing around with the value of fiat currencies, which can be done all too easily, directly adds to the value of tangible commodities, gold being the absolute shining example of a tangible commodity.

The December decision by the ECB and Federal Reserve was erroneously predicted to have an immediate and powerful impact on the price of precious metals. It did, but, unlike most predictions, it caused the price of gold and silver to float down as the Euro and consequently the dollar temporarily gained in world currency markets. Now, however, it appears that particular chicken has come home to roost as the European Monetary Union is in existential danger and member countries are being downgraded left and right.

The clear winners in this scenario are gold and silver. We very much hope that there is some resolution to the European problem in a way that benefits all involved by rewarding hard work, ingenuity, and excellence. However, currently, a realist would point out that none of those three virtues are to be found in the handling of the situation in Europe. Though it may take a few weeks to be made manifest, the problems of Europe will be a main driver of the price of gold and silver going ever higher this year.

Shannon King

Senior Staff Writer – GoldSilver.org

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