January 25, 2012 – Gold and silver investment as a hedge against the financial problems and as a strategy to make money in an uncertain market have made a real splash since the New Year, but a current trend is providing a pleasant dip for buying. The US Mint has set records for orders of both gold and silver Eagles. The Mint sold more silver before the middle of the month than it averaged in ten of twelve months last year. All fundamentals indicate that gold and silver are still in a bull market and will gain as tangible commodities. Clearly, investors are on to gold and silver as the smart and prudent thing to do in this market.
This week’s development out of Europe is the latest piece of this puzzle coming together as bondholders failed to secure a deal which would allow Greece to borrow money at a reduced rate. They now must borrow at 4 percent, or higher, so the decision of whether the cradle of Western civilization will face a hard default is now primarily in the hands of private creditors. A hard default would place all European economies at serious risk. The possibility of a serious sovereign debt defaults in Europe just got a lot more real.
The result is a temporarily weak Euro as this bad news hit currency markets first and the Euro hardest. There is substantive concern among the biggest banks and hedge funds over the stability of the Euro, especially going forward in these next few months. The most recent to publicly state so is the head of sovereign ratings at S&P who said he believes “Greece will default shortly.” Recently, while giving an interview to an Italian newspaper, Jamie Dimon, CEO of JP Morgan, has said his bank could lose up to $5 billion from exposure to the European problem. Italy owns a great amount of Greek debt. JP Morgan’s persistent weakness is especially significant since the failure of MF Global due to exposure to bad European debt. The MF Global debacle provided all the impetus, political and economic, Dimon’s bank needed to fully hedge its bets and risks in Europe if not isolate itself from Europe altogether.
Most banks and funds have already hedged the Euro and the ramifications of a Greek default, and most have done so with gold and silver investments. It is the prime way to protect yourself against the Euro’s influence on the American dollar and all fiat currencies and profit from the current crisis. If the economy improves, commodity prices go up and gold and silver go up. If the crisis continues getting worse, precious metals will benefit from their traditional safe haven status as even more investors from all over the world flock to gold and silver.
Senior Staff Writer – GoldSilver.org