Another reason for gold's decline is the strength of the dollar. As the Euro falls the dollar becomes the safe haven. There are many potential problems in the world now that could affect gold. The banking system is stressed and there are rumors of major banks in trouble. Stocks of Bank Of America have fallen to around $5 a share. It is thought that they were bailed out last summer and that they are being helped again now. Of course the Feds will not comment. On Friday Bloomberg News released data on the Fed emergency lending of 50,000 transactions made through seven different financial mechanisms. These programs represented 1.2 trillion dollars in loans to banks and financial institutions.
IMF Chief Christine Lagarde said "Currently the world economy stands at a very dangerous juncture." She called it a crisis of slow growth and high unemployment. Europe, the US, and the BRIC nations are all experiencing down turns. The world economy is so intertwined that most countries are feeling the pain. For us here in the US we have the added problem of gridlock in our government. Our government can not manage their checkbook. Our national debt amounts to around $136,000 per household and is climbing at the alarming rate of almost $1000 per household per month. It seems that this insane spending will eventually crash the system and the only thing the Fed can do is print!
Gold should shine in this environment. We may not be there yet, but it is a good bet it will happen. Many economists feel the QE3 is just around the corner, possibly starting in January. Right now gold is $300 an ounce cheaper than it was in August. Silver is down almost 40% from the high. Have your cash ready!
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