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Some investment gurus are suggesting that investing in gold is good hedge (bet) against inflation and/or stock market collapses. While the dollar / pound weakens then your savings will also decrease in value as measured against stronger foreign currencies and against commodities such as oil or gold. The economists that I like to follow are bullish on Gold and are bullish on China. Read on for why.
In a recent article I pointed out that a group of physicists had a bubble in the Chinese stock market. I agreed that they had predicted a drop in price of the Chinese Index but I didn't agree that it was a bubble. It is merely a correction. Many people get excited and buy in to the market, the price will rise if there are more buyers than sellers. Price drops when more people want to sell than buy. No black magick analysis needed here. China has implemented a fiscal stimulus like many other countries, which I think is a bad thing, but they are in better shape to resist negative side effects of reinflating their economy. Fortunately, Jim Rogers also agrees that China isn't in a bubble. At least not yet. Amusingly the US is encouraging China to spend more and save less. It seems like the the US is suggest that China consume to become "enlightened". Is it ironic that the USA, currently in the worst financial crises ever, is advising another country on fiscal policy? Yes, yes it is. Jim says: "Geitner has been wrong for the last 15 years." Saving money, building infrastructure and promoting industry is why China is so strong and also why the US is failing. A recent article reports that China is encouraging its citizens to invest in gold and silver: Apparently China is pushing the idea of buying gold and silver for investment purposes to the general population in the way that Western television sells soap powder. This is an amusing mental picture that shows the great divide in thought between Western and Oriental culture. Perhaps inadvertently but while we consume and spend money, those across the world are saving money for a rainy day. I'll admit that China is still a vast consumer and could do well with cutting consumption, like all nations. I think efficient by design / habit and frugality should be the mode of thought in both the West and the East. If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market! Demand increases and supply is limited: prices will hike. Ron Paul's recently made a suggestion to audit the Fed. Some believe that this will reveal that the US Federal Reserve is trying keep the price of gold and silver artificially low. Why? So that they can save face and pretend the current economic crisis is not as bad as it is. If the dollar weakens and stocks decrease then the price of gold will rise. If the price of gold doesn't rise that the hope is that the dollar (and stock) won't look as weak. I have money in gold and gold mining stocks so I'm keen to see the price rise, I did it because I hope it will protect my savings.
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