Gold's time is coming! 12-18-2011

One wonders if those responsible for our current predicament will ever pay for it.  On December 16th the SEC filed civil suits on 6 former Freddie and Fanny executives.  Of course Barney Frank wasn't included even though it was his job to oversee them.  It will be interesting to see if anyone goes to jail.

Four co-authors on a website of the Federal Reserve Bank of New York presented some findings from a recent study.  According to the study, more than a third of the homes purchased in 2006 at the peak of the housing boom, were by people who already owned a home.  In some of the biggest bubble states like California, Nevada, Florida and Arizona it was almost half.  Almost 20% owned more than two.  Many of these people simply walked away from the properties when they saw no more appreciation in the future.  More unintended consequences from government policies.

What about Europe?  Senator Bob Corker, a Republican from Tennessee, said Bernanke made it very clear that no additional aid will be given to the region's sovereign debt crisis in a meeting with law makers. Lindsey Graham, a South Carolina Republican said Bernanke told lawmakers the he doesn't have the intention or authority to bail out countries or banks.

Question:  A Greek, and Italian and a Spaniard walk into a bar.  who picks up the tab?
Answer:  The Americans!

Reuters reported that Fitch Ratings, the third biggest credit rating agency, downgraded Goldman Sachs, Deutsche Bank, Barclays Pic, Credit Suisse AG, B of A,BNP Paribas, and Citigroup.  This is the  result of economic developments and regulatory changes they said.  They also cited a policy momentum against using tax payer money to support banks.

French President Sarkozy said the legal basis for a new accord on debt and deficit rules in the 17 nation euro area will be put together by Christmas and hopes to have a treaty by March.  Sarkozy also said, "you have to understand this is the birth of a different Europe.  The Europe of the euro zone in which the watchwords will be the convergence of economies, budget rules and fiscal policy.

What is hard to get your head around is that we are in worse shape and we are trying to tell the rest of the world how to respond to this crisis.  We have to borrow 40 cents on every dollar the government spends.  Not a shining example!  In fact we fully expect the printing presses to be unleashed in the new year and the European Central Bank will most likely buy more bonds to keep interest rates low.  

This brings us to our point of this article.  Gold and silver.  When the Fed and the ECB start "easing", gold and silver will shine again.  They have shined since the start of the financial crisis and there is no reason to believe that will change.  This latest downturn has created a potentially great buying opportunity.  Many pundits are predicting gold at well over $2000 in 2012.  In addition the gold and silver stocks have been hammered and are oversold giving extra leverage to any uptrend in the metals.  Below is the spot gold chart.

Here is the chart for the gold stocks.

Both may have some downside to go but we are getting close to a place where we should be accumulating.