The price of gold has reached another big round number, breaking through the $1,300 mark today for the first time ever.
And at more than $21 per ounce, silver is higher than it’s been in three decades.
The Financial Times today ran an article that echoes something that we have been saying for months – the risk of “competitive currency devaluation” may now be the most important driver for precious metals investing.
Japan brought attention to the benefits of strategic devaluation when it openly took steps last week to weaken the yen. Japan’s prime minister says his government will do what it takes to keep the currency down.
And this week the Federal Reserve hinted at another round of quantitative easing, and as a result the dollar has seen a decline in value.
Japan, the U.S. and the European Union are all dealing with little to no economic growth at home, so they’re hoping their export sectors can lead the way. Keeping their currencies down is an important part of turning that hope into reality.
Here’s a link to a commentary I wrote back in February that discusses gold in a deflationary context, and which also touches on competitive currency devaluation. The basic view is that both deflation and devaluations make gold more attractive as a safe-haven investment.
And I also encourage you to visit Morningstar.com, which today has an article on how some funds have benefitted from their exposure to gold. Our Global Resources Fund (PSPFX) is one of the funds mentioned in the article.
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Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
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Gold is strong because of
(a) A $13.5 trillion national debt as well as $6 trillion debt of Fannie Mae and Freddie Mac, which the taxpayers are on the hook for but which is not carried on the county’s books.
(b) Huge sovereign debt owed by several European countries with potential for default.
(c) Huge debts with pending defaults from several large US States, counties and municipalities.
(d) And most of all, $1.7 in Quantitative Easing already done by that monkey with a hammer, Ben Bernanke. Helicopter Ben is also planning another $3 trillion in Quantitative Easing in the nest 9 months. This guy is nuts.
Gold should be selling for a hell of a lot more than it is.
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“There is no means of avoiding the final collapse of a boom brought about by credit expansion.
“The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
~~Ludwig Von Mises