Why Gold, Silver are Rising and Not Falling? – GoldSeek.com

You would have thought that a ‘resolution’ to the Eurozone debt crisis would have caused gold to tumble, the euro to soar, and the dollar to fall –perhaps with the gold price in the dollar steady. So why is the price of gold behaving as it is?

There are so many imagined relationships between gold and other factors and as each one proves incorrect, another takes its place. Is this because the media needs to keep our attention? In part yes, but the credibility that’s given to these stories comes from the markets’ desire for hope, often unrealistic desperate hope. Gold and silver, in their role as counters to currencies, are harbingers of uncertainty, fear and (to the banking system) a threat to the credibility of paper currencies.

As a Counter to the Eurozone Crisis

What was thought of as a successful solution to the Eurozone crisis, as the bright fog cleared, was seen as it is –a lifeboat to the euro and not a repair of the ship. Markets are wise enough to see this, so global buying came in as the deal was announced complete without details. The bottom line is that the structural strains of having weak economies joined at the hip to strong economies under one currency cannot work until there is fiscal union and a centralization that overrides national governments, such as is the case in the U.S. It is no coincidence that this is what would have happened had the strong nations of the Eurozone conquered the weak ones in war. Europe has been battling with that problem for well over 2,000 years, so don’t expect dramatic success on that front.

A single currency for different economies simply allows capital to flow from the weak to the strong and place untenable strains on the weak. The facilitation of this through loans far in excess of their capacity to repay them made the formula palatable, until now. While there has been a write-off of 50% of Greek’s loans, they’re burdened with a repayment schedule that continues to leave them in a weakened position. The same can be said of the other debt-distressed nations of the Eurozone (Portugal, Ireland, Italy and Spain).

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via Why Gold, Silver are Rising and Not Falling? – GoldSeek.com.

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