If the bullish scenario plays out this week, flows are likely to be tilted more so to North America ...
The Fed Hit the Panic Button
02/13/2008 12:00 am EST
Pamela and Mary Anne Aden, editors of the Aden Forecast, say the Fed is doing whatever it takes to avoid recession, which is bullish for inflation and for precious metals.
Everyone's talking about recession. In fact, recession is everywhere-on CNN, "60 Minutes," the cover of Newsweek, in other magazines, in the newspapers, television, the Internet and so on. Suddenly, the economy is the hot topic.
As signs became obvious that the economy was in serious trouble, the Federal Reserve hit the panic button. This followed a nearly one-day 600-point drop in the Dow Jones Industrial Average and sharp declines in several of the other world stock markets.
Knowing the importance of these market signals and probably fearing a crash, the Fed abruptly slashed interest rates before the market opened on January 23rd, in its first emergency move since 2001. One week later, the Fed dropped interest rates again.
As we've often said, when push comes to shove, the Fed will do whatever it has to do to keep the economy afloat and to avoid a recession. That was clearly illustrated [last] month, and if there was any doubt before, it's now more obvious than ever that the Fed has taken and will continue to take the inflation path. This is not only true of the Fed but of all the world's central banks.
As you know, money has been pouring into the system for quite a while now. Credit is cheap, and it keeps getting cheaper. Money is now also going to be given away to over 100 million people in the US to the tune of about $150 billion. It's even going to be given to people who don't pay taxes, all in the hope that they'll spend this money to help ward off a recession.
If that doesn't do the trick, we're sure the Fed and the government will come up with more ideas, and if this results in more inflation and an even weaker dollar-and it will-then so be it. There's really no other choice.
Whether the economy ends up falling into recession or not, there's no question that gold is benefiting based on what's happening. It's risen strongly since 2001, it's currently at a new record high and it'll continue to move higher. In fact, gold, silver, and most of the gold shares are about the only markets to show gains so far this year. Everything else is down, and in many cases down sharply.
Gold is hitting new or multi-year highs against the euro, the Dow Industrials, bonds,m and oil. In other words, it's outperforming them and the percentage gains are greater in gold compared to all of the other markets.
Simply put, gold is where you want to be. Silver is good, too. These are the best markets, and if you've been banking on other markets, then you've probably been disappointed. That's why we've consistently stressed keeping a large part of your investments in gold, silver and their shares.
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