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Gold price action tells us crisis is real

As is often the case, this week’s significant price action in gold garnered media attention.  First Fox News’ Channel 10 came by yesterday for a live broadcast at 9:30 am, followed by a brief interview that aired for the evening news.   Later Channel 12 came by to get comments for their evening news.  This morning, a reporter called, wanting to develop a gold story for Channel 5.

Invariably, the reporters want to know if gold’s price action has resulted in increase calls.  Yes, we are seeing increased calls, but nothing like the volume of calls we received when the GFC (Global Financial Crisis) surfaced in 2008.  We could not handle the calls then.  What’s the difference?  Why the crush of calls in 2008 buy fewer calls today?  Doesn’t gold’s price surge signal significant problems?

First, gold’s continued move today to the upside does suggest real concerns, not only about the dollar but the euro and all other fiat currencies.  Just when the Europeans thought that they had calmed the waters with the Greek bailout, Italy’s problems surfaced.  And, last week the Bank of Japan sold huge quantities of yen in an effort the lower the yen’s value.  (Anyone old enough to remember when a strong currency was desirable?)

Still the 2008/2009 GFC more directly impacted average investors than does today’s currency crisis.  Average investors knew it was bad when Lehman Brothers failed , Merrill Lynch went bankrupt and was  forcibly rolled into Bank of America by regulators and mortgage companies went under.  Not to be omitted from the GFC was the housing collapse, which directly impacted millions of average Americans.   They understood what was happening in 2008/2009; they are not as attuned to S&P downgrading US debt.

Although average investors  can see a free-falling stock market, they have not yet reacted to it.  As the losses grow worse, many investors will pull out of stocks and move to the metals, proving a whole new group of buyers, which will send prices yet higher.

Finally, it must be noted that Congress’s failure to quickly agree to raise the debt ceiling contributed to rising gold (and silver) prices over the summer.  As the issue wore on, many investors looked  at the situation and did not like what they found.  They became precious metals investors and helped make this summer one of the strongest in decades.

Gold now has the media’s attention.  We can expect more frequent and hopefully better coverage as prices move higher.  We can also expect widespread coverage when there are significant price moves to the downside as there always are in bull markets.   Nonetheless, this is a precious metals bull market, brought on by a real currency crisis, which will not soon be resolved.

Once again, Bill was contacted by another news station, KPHO News 12, for further insight into recent developments regarding gold.

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