Expect a Bull Run on Silver
Jul 16th, 2008 | By Brian Hunt | Category: Featured, Financial NewsGold prices hit a four-month record yesterday, driven higher by the falling dollar and slumping equities.
Investors looked for a safe haven after the greenback hit a record low versus the euro. Gold prices reached $989.60 an ounce and fell back to $978.70 after a sharp drop crude oil prices.
Gold is not the only precious metal gaining ground, says Brian Hunt. Silver has gained 27 percent this year, against gold’s 17 percent. As long as the US government insists on bailing out the likes of IndyMac (IMB), Fannie Mae (FNM) and Freddie Mac (FRE), investors will turn to precious metals to protect themselves.
Catastrophe insurance is getting more expensive this week. We’re big fans of gold and silver at DailyWealth. We don’t think the world is coming to an end… We simply see precious metals as excellent catastrophe insurance – assets that soar when stocks and bonds are sinking.
Last week’s destruction in Fannie Mae and Freddie Mac counts as a catastrophe… and silver is making good on its “claims.” After trading around $17 per ounce since March, the precious metal has broken out to $19. The chart of gold looks much the same.
Here’s the reason for the strength in gold and silver: Precious metals rise when investors smell serious risks to the financial system. They rise when the government spends too much money and extends too much credit, which stokes inflation. Silver’s breakout is a response to the huge liabilities our government is assuming with Fannie and Freddie.
In “market speak,” silver is telling our officials in Washington, “You’re going to spend all that taxpayer money on a big bailout? This could be bad… and I’m heading higher.”
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