Author Archive: David Levenstein
David Levenstein is a leading expert on investing in precious metals . Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.
If you’re holding paper currency, you have to have some kind of trust that the country that issued it is not just going to print its way out of its problems. That’s a real concern right now. Gold, on the other hand, has real intrinsic value, unlike a paper currency which can be debased by its government.
Gold offers that same traditional hedge to individual investors as well as central banks. Today’s financial system where unelected central banking elite conjures trillions of dollars and euros out of thin air cannot continue forever. It has an expiration date. And, gold with its millennia-long history is making a comeback.
These days, most investors seem unconcerned about the unsustainable levels of global debt and the inflationary potential of the trillions of dollars created by the major central banks especially the U.S Federal Reserve. And, few seem the least bit worried about what a zero interest rate policy (ZIRP) or even a negative interest rate policy (NIRP) will ultimately do to the purchasing power of the dollar.With slow global economic growth, ZIRP and NIRP, expansionary monetary policies of the major central banks as well as exploding debt levels, the future of our current financial system looks very precarious. Despite all of the disparaging talk about precious metals, I believe that the current low levels offer spectacular value.
While Demand for physical gold and silver in August and September has been exceptionally strong as investors seek a safe-haven from market turmoil, the traditional months of strong demand from Asia are now ahead of us which will add even greater demand for gold in the coming weeks. In India, gold demand will reach its peak later than usual this year as Diwali falls in the second week of November.
Gold prices began this week on a slightly negative note as prices drifted back towards their lowest levels since mid-August after US payrolls data failed to provide clarity on the timing of a US Federal Reserve rate hike, and as the dollar steadied against other majors. Despite concerns about the Fed tightening, gold recorded its best month this year, gaining around, gaining about 3.4% for August for its first advance since May.
The price of the yellow metal gained more than 4% last week amid a global sell-off of equities and commodities. The upward momentum in gold prices began the previous week when China devalued its currency, the yuan. And, last week the release of the minutes from the Federal Open Market Committee (FOMC) meeting left market watchers unsure about an interest rate rise in the US in September, adding to uncertainty caused by China’s devaluation of the yuan. This in turn, as well as a number of other factors, including falling prices of other commodities, have led investors to turn to gold.
The surge in demand for bullion coins and bars will soon have a positive impact on prices. Even though it has been extraordinarily difficult for some investors to keep their conviction and hold on to real value while paper markets relentlessly discount it, I am entirely convinced that we are getting to the end of this current bear market.
While, I think the current negative sentiment towards gold is unjustified, and set to continue, as far as I am concerned, the investment case for gold remains intact. The long-term investment case for gold is not based on short-term price movements. I believe every investor should own some physical gold and have it stored out of the banking system. And, if you have not yet included gold in your portfolio this is probably a great time to buy. It may go down lower, but you will almost never find the bottom.
I have mentioned countless times that the world is drowning in debt and the implications of this are obvious. We are either going to experience a debt deflation driven depression or we will experience a complete collapse of the current currency system, and some form of hyperinflation. People have been buying gold and silver to protect their wealth from monetary crisis for thousands of years. It’s the only way to keep your wealth safe when banks close, stock markets crash, and the government won’t let you touch your own money.
Prepare yourself for an imminent financial collapse. That’s why the safest course of action remains not keeping all your eggs in one basket. Instead, you should diversify a portion of your assets to non-paper assets such as gold.
In the unlikely event that the Fed raises rates in September, gold looks poised to continue higher over the long-term as investors will likely seek out its wealth preservation qualities as the U.S. Dollar continues to lose value in real terms. The global economy is not strong, and in fact could not tolerate higher interest rates. The ongoing currency war will also serve to keep currency values down as economies fight to keep moving forward.
Last week, the global gold market was rather subdued as the upward momentum in prices ran out of steam hitting resistance at around $1220 an ounce. Despite a mild rally on Friday, gold prices fell for the second week in a row. The price of the yellow metal edged up on Friday from the previous day’s 2-1/2-week low, supported by a slightly weaker dollar and uncertainty over Greece’s debt talks. On-going concerns over a potential Greek debt default weighed on the global financial and gold markets last week as G7 leaders scrambled to try to come up with an 11th hour bailout package.
As I have mentioned on many occasions, the current debt levels are totally unsustainable and without any real economic growth, there is no way that this will be resolved without a major monetary collapse or reset of the current fiat system. However, many people have no idea of what is really going on.
Governments and banks around the world are making it more difficult to save and transact with cash in their latest attempt to financially suppress their citizens. Their goal is to force you to deposit cash and charge you interest as well as having total control over the money on deposit.
Not surprisingly, the reason given was to “fight terrorism!” The war on cash is proliferating globally. Recently, the Swiss National Bank implemented negative interest rates without first solving the “problem” of how to prevent cash from fleeing the banks. And as to be expected, prudent depositors started doing some calculations.