Investors are beginning to take a more serious look at gold and silver as a store of wealth as the Wall Street’s numbers game fails to lend credibility to the recovery myth.
Anemic growth in the job market in March – at 120,000 it was the poorest showing since last November – coupled with a rise in new jobless claims dampened hopes that our unemployment woes were over. Oil prices have fallen somewhat but gas prices still have Americans reaching deeply into empty pockets.
A strong showing in retail sales – up 0.8% in March – and rising building permits got the Street off to a good start last week, but by the end of the week all of the indicators came out a wash. Housing starts, sales of existing homes, and industrial output all fell, underscoring a second quarter slowdown.
The situation in Europe isn’t any better. Markit’s Purchasing Manager Index (PMI) fell again, indicating that a stronger than expected contraction is still underway. Spokesman Chris Williamson notes that “Germany saw growth weaken to near-stagnation, while France saw a worryingly steep downturn,” running the “double-dip recession into a third consecutive quarter.”
The CBOE Market Volatility Index (VIX), or ‘fear gauge,’ shot up nearly 16%. Although the index has since fallen back from its peak of 20.19 it is still hovering about its historical absolute floor of 14.4% and its 20-day moving average is set to cross the 50-day average for the first time in several months.
Against that backdrop gold and silver fared quite well in Q1 2012. Silver comes out the winner, rising 16% against the dollar, 12% against the euro, and 20% against the yen. Renewed interest in silver as a store of value have led Thomson Reuters GFMS to stand firm on its prediction that silver would reach $40 later this year. When the same prediction was made last year, the silver price topped out at nearly $50.
There is nothing new in all of that, with the possible exception that the leading indicators are tilting towards what Main Street has known all along: economic recovery is just a myth.
That realization is drawing investors back into gold and silver, not for profits but for wealth preservation and financial protection in an economy that is still decidedly in decline.