Metals Gaining Support From Safe Haven Demand
by Joe Battaglia
Posted: July 10, 2008
Gold is up $13 and
silver is up $.18 in early trading. The
metals gaining a lot of support from safe haven demand as the problems in the
banking system continue to worsen. It
now appears that many analysts were correct, that Fannie Mae and Freddie Mac
have severe problems. The stock in both
of these companies has been falling like a stone as a result of revelations
that they may need to raise as much as $75 billion. Some are even saying that they are basically broke. If that is the case, we then have the
question as to whether the Federal Government will bailout these agencies. While they are not actually government
agencies, contrary to the implications of their names, there is an implicit
promise by the government that they would stand behind these
organizations. I have seen reports that
these two organizations may be guaranteeing several trillion dollars in loans
that are likely to default and have more than $12 trillion in loans on their
books. If the government does not bail
them out, their collapse could cause a domino effect resulting in the collapse
of many financial institutions and perhaps even a run on the banking system
that is worse than anything that we have seen to date. That is the reason why so many investors are
moving toward gold as a safe haven asset.
Gold and silver are
up in spite of the fact the dollar is stronger today, up 15 basis points at
72.73 on the index. Oil is also
rebounding this morning, up $1 at $137.04.
Yesterdays aggressive decline in the equity market was a direct result
of the problems surrounding Fannie Mae and Freddie Mac. Yesterdays 237-point drop in the Dow is now
being followed by a further decline in the equity markets this morning. We have been receiving significant warnings
from the Royal Bank of Scotland, the BIS, Fortis Bank, Barclay's Bank and
others that a major stock market decline or crash could be at hand within the
next three months. This major decline
may have already begun.
Investors should
read the articles Goldline is providing for free quoting all of these major
banks and brokers. It is vitally
important that you have this information in making your investing
decisions. As I watch some of the
commentary on the financial news programs, I find the information being
presented to the public is contrary to common sense and logic. It is not prudent to try to catch a falling
knife. Nor is it prudent to try to own
equities at a time when the market is falling aggressively and the problems
seem to be getting much worse. At some
point there will be a bottom and great buying opportunities will emerge in the
equities. However, it would appear that
we are a great distance from that point in time. For at least the next 12 months it is likely equities will remain
under pressure and the bank problems will worsen. There are going to be as many as 2 million mortgages resetting to
higher levels in August. It is anticipated
that foreclosures may grow by more than 1½ million over the next 6 months. This will continue to put extraordinary
pressure on the banking system. It will
also force further problems for the banks.
Former Fed Governor
William Poole said today that the economy will remain under severe pressure and
the banks will have significant problems for at least another year. In the brokerage sector, which is involved
with credit derivatives you have Lehman Brothers, which is down almost 15% this
morning. Freddie Mac is down over 30%
and Fannie Mae is down about 14%. These
banks and brokers are a heavy weight on the markets and on the economy. Moreover, Fannie Mae and Freddie Mac are two
of the agencies that Congress anticipated bailing out the investment-banking
sector. They themselves now require a
bailout.
When you have a
mess like this, you want to opt for safety and security. Investors should seriously consider moving
assets into treasury bills, insured CD's and similar assets, along with a
proper and appropriate diversification into gold and silver assets. Call Goldline today for the free information
package and ask them to assist you in getting started with your gold and silver
diversification.
Investors should
contact Goldline and ask them to explain the features, benefits and cost
structure of the various gold and silver investments that are available to
you. Select those that best meet your
own personal and individual investing needs and objectives. Investors looking for low transaction costs may
wish to consider bullion assets such as American Eagles, Krugerrands, Canadian
Maple Leafs, Silver Bags or Silver Bars.
However, the Price Guarantee Program is not available with these assets.
If you would like
to take advantage of the Price Guarantee Program, which provides you with a
two-week window of opportunity in which to re-price your order in the event of
a correction, you must select assets with some collectible value such as Swiss
20 Francs, Double Eagles and Silver Dollars.
When you acquire 29 Swiss 20 Francs, you will receive the 30th
coin for free. Investors may wish to
consider several tubes of these coins to obtain several free Swiss 20 Franc
gold coins. Call Goldline at
1-800-827-4653 for further information.
To receive the free information
package including the four articles on the dollar, the economy and gold call
Goldline at 1-800-827-4653. Goldline
also provides several other helpful articles.
There are a number of other independent third party source articles that
you will find extremely helpful and informative. You will also receive the Client Account Agreement, a company
brochure and a Coin Facts Risk Disclosure Booklet, read these carefully before
you make an investment.
Goldline will also send you a free
CD of the special interview with analyst Frank Barbera if you ask for it. This is a remarkable interview and I think
everyone would benefit from listening to it.
Call Goldline now to receive your free information package at
1-800-827-4653.
You should carefully read the client Account Agreement and the Risk Disclosure information.
These explain important things you need to know before you invest in precious metals, such as:
past performance does not guarantee future results. Transaction costs are generally 5% to 10% on
bullion and 30% to 35% on coins. This is also referred to as the spread, or the difference
between the buy price and the sell price. The market must go up enough to overcome this spread
before an actual profit is achieved. All markets go up and down. Coins are a long-term, three- to
five-year, preferably five- to ten-year investment, suitable for 5% to 10% of the average
portfolio. Please see Goldline's Risk and Disclosure Statement for further details.
Back to Daily Commentary
