“We can expect more of the same – specifically, serial bailouts of governments and banks that, if not already insolvent are bordering on insolvency. It is a distressing prospect.”
So says James Turk, in his 2012 prediction piece for the GoldMoney website.
This comes as Friday bought confirmation that Greece’s budget deficit is heading into double digits, while the latest figures from the Federal Reserve show non-US investors dumped a record amount of US Treasuries over the past month. As ZeroHedge comments: “foreign holdings of US paper have been virtually flat in all of 2011, something which is in stark contrast with what the price of the 10 Year would indicate vis-à-vis investor demand.” The USA’s federal debt-to-GDP ratio now stands at 100%, while President Obama has made a new pro forma request for a $1.2 trillion increase in the US government’s debt ceiling.
Gold and silver prices enjoyed a nice bounce on Friday, with gold recovering back above $1,550 and silver briefly moving above $28; however, the white metal finished the day back under $28. $1,600 and $30 represent the price levels in the two metals that bulls will be looking to recapture quickly in order to avoid any further downside setbacks.
The bull’s cause will be greatly aid – particularly as far as silver is concerned – by any new weakness in the US dollar. The Dollar Index (USDX) fell 0.2% on Friday to 80.2, with that index struggling to break above 80. Ultimately, the dollar’s short-term fortunes are the inverse of the euro’s. If markets become more confident about the situation in Europe, then the dollar will weaken and the euro will rise, which should be bullish for precious metals and commodities. If on the other hand the situation in Europe deteriorates, then the dollar could strengthen further against the euro, which could cause further short-term difficulties for the metals (particularly silver and the platinum-group metals).
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