The Federal Reserve admitted the economy is close to stalling. With the economy tanking, banks in the business of lending are not lending to stabilize the financial system despite their bail outs credit remains tight. No wonder to the average persons on the street are shaking their heads in looking at the entire economy system and saying its crazy. Fears are justified over loosing homes: don’t or can’t buy and banks don’t lend. Although mortgage rates are low, housing is 25% down from last year.
That is one enormous quarter! With no signs of easing, real estate level could easily pop over by next year. Stock markets could roll over and start their way down. Then, as people get really scared, all the real estate levels will start popping. When people have to pull back, can’t refinance their homes or trade up for a larger home, at that point the real estate bubble stops and pops. The wind is moving in that direction, which will further crush the economy. These are not doomsday scare tactics, but facts of reality being dealt in present day economy.
On the flip side, Felix Zulauf, who was profiled in this week’s Barron’s, says what others are, to get into gold because we are in deflation cycle like Japan. Looking at his prediction, it seems to align with the Financial Times. Although there is a plus and a minus for everything, because everything comes in waves of cycles in life, gold cycle has just begun to run on a wave that will ring in history.
It’s fascinating, just how the bull market in the 70’s drew tremendous interest. Everybody, even the gold haters were watching that bull market with keen interest. By the 1999’s it moved again upward. In 2002 gold broke at $300 and the corral opened for the golden bulls.
Ravenous for information, it further bought my attention as to why the giant shift in the central banks and gold. Back in 1971 to 1980 Central Banks were selling gold not buying. In the 90’s gold was manipulated. Central Banks realized the less they sell the higher the price of gold. But by 2000, they couldn’t stop the golden bull. In 2009 they were going to sell 4 million ounce of gold, but this reversed itself, and instead of selling, the Central Banks brought 15 million dollars worth of gold. It simply proved that governments around the world had begun to distrust the dollar.
But while the enormous shift in gold began, it didn’t include Asian gold buyers like China, Iran and others that are still buying under the table with no official numbers because it is not reported to the World Bank or the IMF. In fact, there are new headlines about Iran accumulating gold to get rid of dollar reserve. “Iran bolsters gold reserves to cut exposure to dollar” reports the Financial Times. So, it actually gets reported, but only by the news media, not to the World Bank, the IMF or the World Gold Council. So this is a big game changer to bring an attention to, because it’s going to the greatest bull market in history! To back this up, there is no country immune to the US Dollar. If it catches a cold it is contagious, which means the rest of the world will be sick. As the Eurozone further moves to disbandment, it’s not a pretty picture out there. Adding more debt to an already large debt usually leads to defaults and bankruptcies. Argentine and Greece are good examples of this.
“Precious metals are just coming up and are still undervalued and not close to fair value. The Dow Gold Ratio proves that gold is still undervalued so this bull market will continue. Gold has been rising for 10 straight years, its still very undervalued,” says Regal Asset Team of Analyst. With the missing ingredients for house recovery and Euro debt crisis, Zulauf is basically saying, get into precious metals now, it’s a safe and sane asset protection that will keep you well.