By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
Gold and silver prices have been strong since the end of July, with gold up more than 7% and silver up 17% since then. The next two shocks to the precious metals markets will hit on Wednesday, September 12. My expectation is that the impact will be even higher precious metals prices in the immediate future.
The first event will be a decision from the German Constitutional Court as to whether that nation will acquiesce in last week’s European Central Bank announcement that it would begin bailing out failing European banks. The mechanism of the bailouts occurs through the purchase of the bonds of such banks. This will effectively result in the inflation of the Euro money supply, also known nowadays as quantitative easing.
On the same day, in the early afternoon Eastern time zone, the Federal Open Market Committee will conclude their regularly scheduled meeting with their announcement. Most analysts now anticipate that the Fed will also announce its next quantitative easing program. This expected announcement will likely be blamed on last week’s negative US jobs report. The jobs report showed that even though the number of potentially available workers has increased by more than seven million since January 2009, the number of jobholders in the US has actually declined by five million since then.
With both the Euro zone nations and the United States taking major steps to devalue their currencies, other nations will be forced to do the same in order to keep their exports competitive in global markets. As currency values decline around the world, gold and silver prices are bound to soar.
Governments around the world have boxed themselves into a corner. Previous inflations of the money supplies made the current financial crises inevitable. Now the only so-called solutions for putting out these fires that the politicians are offering is to pour even more fuel onto the flames by engaging in new rounds of quantitative easing.
In the past couple of years, how many times have the Eurozone politicians said they have agreed upon a solution to their financial crises? I think the answer is approaching 40 occasions. Yet they have made absolutely no progress at resolving the problems, despite what they claim.
For all practical purposes, the US economy is in an even more precarious position, where accumulated government and private debt now exceeds the combined wealth of the entire planet.
So, with the governments around announcing that they are destroying the values of their own currencies, why would you want to own them? On the other side, gold and silver have a multi-thousand year track record of holding their value and never failing.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.