One more month to go before Gold's usual "summer doldrums" lead to its regular autumn rise...
BANKS CONTINUE to shirk debt, writes Julian D.W. Phillips of GoldForecaster.com, fearing that a continuation of slack lending practices will hurt their bottom line more still.
That means credit deflation will continue alongside other ills in the financial markets, threatening to depress the US economy even more. So the Federal Reserve, in setting its interest-rate policy, must err on the side of growth and allow inflation to grow. The alternative – fighting inflation – simpy cannot be considered.
Doubts about banking, inflation, credit deflation and the value of the Dollar continue to favor Gold and silver and will do so for the medium if not long term as well.
Gold has one more month before its 'season' – following the usual summer doldrums – begins again. So sellers are moving to the cautious side now. Apart from hope that things can't be so bad, there is little reason not to Buy Gold as defense against the on-going problems in global finance and credit.
For the Gold Price to hold its current levels, at this time of the year, is encouraging. We are seeing an expression of investment demand almost in the absence of physical demand. (Read more about the picture for Indian Gold Demand here.) This is telling us that, when they weigh up the future of the banking system and paper currencies against Gold and silver, investors hold a solid belief that precious metals have a place in prudent portfolios.
None of the measures taken to date by the developed world's central banks so far have addressed the fundamental structure of the monetary system, so we can only expect more 'fire fighting measures' in the future and the atmosphere of uncertainty to persist. The credit crisis is a reflection of the banking system and how dependent we are on it.
The environment continues to favor Gold and silver as a safe-haven against these fears.