Precious Metals Make Solid Rebound
by Joe Battaglia
Posted: March 25, 2008
Precious metals
posted solid rebounds today with gold breaking out above near-term resistance
levels. Silver also looking very solid. Gold is up $14 and silver is up $.44 in
early trading. Platinum and palladium
both posted excellent gains with platinum up $58. Much of the rally this morning in precious metals derives from a
very weak dollar. The dollar is down 56
basis points at 72.39. The equity
market is also lower. The key factor
for the precious metals is that the dollar weakened substantially against the
euro. Part of that was due to the very
poor consumer sentiment index. Consumer
confidence is at the lowest level since the start of the Iraq war and is at
levels seen during the oil embargo of the 1970's. Home prices fell in January.
That too is a factor that is very negative for the dollar. The weakness in the housing market is broad
based and across most sectors of the country.
The Case Shiller Ten City index for January made a record decline of
11.4%.
All of these
economic indicators suggest the Fed will have to continue to pump more money
into the system and lower interest rates even further. Thus far the bailouts have totaled in excess
of $500 billion. In spite of that huge
infusion of money into the financial system, the conditions seem to be
worsening. We learned today that the JP
Morgan bailout of Bear Sterns is on extraordinarily favorable terms from the
Fed. The Fed is assuming control of a
portfolio of $30 billion of junk securities.
They will loan money to JP Morgan in conjunction with the financing of
this takeover for a term of ten years at very favorable rates. With consumer confidence down and jobs harder
to get, it would appear the default rate on mortgages is likely to
increase. That is particularly true
with home prices falling. The further
home prices fall, the less incentive there is to struggle to maintain payments
on a mortgage where your mortgage is greater than the value of the home. As we move into May, June and July there is
probably going to be a substantial spike upward in foreclosure rates.
Given the problems
in the financial system, which weigh heavily on the dollar along with rising inflation
and the imperative for the Fed and the Federal Government to bailout this
problem with huge infusions of cash, I think the opportunity is at hand to
acquire precious metal assets as a way to protect against loss of buying power,
rising inflation, and the credit crisis that is plaguing not just our country,
but the entire world. Barclay's Bank
published a report that has been circulating in Europe that demonstrates how
severe this credit derivatives crisis is.
According to their report, Bear Sterns alone had $13.4 trillion worth of
derivatives on its books. This is
greater than the U.S. national income, or equal to a quarter of world GDP. Now that JP Morgan has taken this over, they
have $90 trillion worth of these derivatives on their books. You can do the math. The point is, is that this is a problem of
massive proportions.
Analysts are saying
gold is a real buy at these price levels and are recommending that people add
to their holdings. Independent analyst
Clive Maund said that gold is real money not just a commodity and it will
continue to benefit from the flight to quality. He also said that gold is back in buying territory after its
correction.
Call Goldline today. Ask them to explain the features, benefits
and cost structure of the various gold and silver investments that are
available to you. Select those that
best meet your own personal and individual investing needs and objectives. Investors who are looking for low
transaction costs may wish to consider bullion assets like Krugerrands, Maple
Leafs, American Eagles, silver bars and 90% silver bags. Investors who would like to take advantage
of Goldline's Price Guarantee Program that gives you a two-week window of
opportunity to re-price your order in the event of a correction, you will want
to consider assets with collectible value as bullion products do not have this
feature available. An asset that fits
within the Price Guarantee Program is the Swiss 20 Franc. Acquire 29 of them and the 30th
is free. Some investors may wish to add
silver in the form of pre-1964 silver half-dollars. Acquire $5,000 worth of them and you will receive free
shipping. You can combine the Swiss 20
Franc offer and the silver special and receive free shipping on your entire
order. Call Goldline now to learn the
details of these special offers at 1-800-827-4653.
To receive the free information
package, which includes outstanding information on the credit crisis and some
of the impacts it will have on Americans, call Goldline. You will also receive the company brochure,
which you will find very informative and you will receive a Coin Facts Risk
Disclosure booklet, which all investors should read carefully before making an
investment. Call Goldline at 1-800-827-4653.
Investors should be mindful that past performance does not guarantee future results. Transaction costs are generally 5%
to 7% on bullion and 30% to 35% on coins. This is also referred to as the spread, or the difference between the buy price
and the sell price. The market must go up enough to overcome this spread before an actual profit is achieved. All markets go
up and down. Coins are a long-term, three- to five-year investment, suitable for 5% to 10% of the average portfolio. Please
see Goldline's Risk and Disclosure Statement for further details.
Back to Daily Commentary
