Geopolitical risk and market uncertainty still exist. One could argue that there is always strong geoplitical risks; however, the current risks are increasing and this makes for a better environment for gold.
The fiscal cliff in the US is real -The taxes increases will occur in less than 40 days and investors do not have an idea of what will happen. Planning for year-end 2012 has to take place and selling more likely. If there is a place to put your money, gold seems likely.
EU risks have not diminished - There has been some improvement in the economic conditions of periphery countries like Ireland, Portugal and even Spain and Italy, but the issue of Greece stills exists and France has been downgraded.
Reflation risks are growing - Deflation never occurred during this financial crisis. Inflation never left the financial system. The level of inflation is till low at around 2% but the threat is on the upside.
Global growth risk greater - There is the belief that gold is correlated with risk-on behavior over the last few years. But if there are no good investment projects, the demand for gold will go up.
What is the cost of being wrong? -The cost of holding gold is low when interest rates are low; consequently, investors can wait for their doom.
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