On the heels of our recent article Gold Buyer Beware (In the Near Term) we present the potential other side of the gold story. Maybe, the tide has turned for gold in respect to its behavior in relation to other assets. There is a decoupling that is occurring on a global scale, but it’s not the decoupling of Western economies from those of China, Brazil and other emerging countries, because our global economy remains very much intertwined.
One of the scenarios we’ve postulated is that if the financial markets experience another stock market crash, gold will follow much like it did in late 2008. However, in late 2008, many global investors had no idea that the world’s economies were in as bad shape as they are. We’re two years into the panic and uncertainty phases of the crisis and the sentiment across millions of people and scores of countries has reached critical mass. While most don’t realize what has happened just yet, or they simply choose to cover their eyes and hope it changes, those “in the know” are making serious moves into safety assets of last resort.
Is it possible that the next time financial markets take a serious dive, gold and other precious metals will flourish? Sure, there could be the short-term panic selling, but there are very strong support levels for the price in the event of a downward move. Countries have been buying the metal by the ton in recent months, as have individual investors the world over. If gold were to take a near-term hit, the number of buyers standing buy to scoop it up at 10% or 20% discounted rates may stop any decline in its tracks. And we may have a similar effect to what gold mining stocks did during the the end of 1931 – while the stock market collapsed, gold stocks began a meteoric rise. By 1935, as the Dow Jones struggled, Home Stake mining, one of the few gold stocks for which records survive, was up over 400%.
What would drive such a move? The common man and billionaires alike realizing that something is amiss. It’s no secret that doom and gloomers have been buying gold, food preps and survival gear in anticipation of a large-scale economic collapse and consequent social and political fall-out. Up until now they have often been dismissed by the mainstream media, neighbors and friends as quacks and fear mongers.
But when some of the world’s larger movers and shakers start doing the same thing, and the media reports on it, then the trend is entering the big time – mass market hysteria may soon follow.
UBS bank and other large investment firms are recommending to their high worth clients that they hold 7% to 10% of their portfolios in gold and/or precious metals assets, with some now recommending direct physical bullion purchases.
UBS reports that one couple recently made quite a large purchase, perhaps acting on the advice of economist and Gloom Boom & Doom publisher Dr. Marc Faber, who in an April 24th interview is quoted as saying, â€œIf someone is rich they should buy a ton every month.â€œ
Fears of a double-dip downturn have boosted the appetite for physical bullion as well as for mining company shares and exchange-traded funds, UBS executive Josef Stadler told the Reuters Global Private Banking Summit.
â€œThey donâ€™t only buy ETFs or futures; they buy physical gold,â€ said Stadler, who runs the Swiss bankâ€™s services for clients with assets of at least $50 million to invest.
UBS is recommending top-tier clients hold 7-10 percent of their assets in precious metals like gold, which is on course for its tenth consecutive yearly gain and traded at around $1,314.50 an ounce on Monday, near the record level reached last week.
â€œWe had a clear example of a couple buying over a ton of gold â€¦ and carrying it to another place,â€ Stadler said. At todayâ€™s prices, that shipment would be worth about $42 million.
One can only surmise that the mega-rich, those in the know with connections within our political and financial systems, already have a good idea of what’s headed our way. And they’re not taking any chances with their wealth, or safety.
The near term outlook for gold may be uncertain, as is the outlook for global financial markets – both will be volatile and the moves may be violent in either direction. This is what happens when a failing economic system is in its death throes. But for gold,the long-term trend remains intact.
Mac Slavo Views:
Read by 201 people Date: October 5th, 2010 Website:www.SHTFplan.com
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