Gold and silver will shine over the next few months

Through the COMEX close on Monday, January 30, the prices of Gold and Silver had increased more than 10% and 20% over the course of the month. Had these results been realized by any of the major stock indices, you can be sure they would garner headline coverage. But strong markets in gold and silver continue to receive comparatively minimal reporting by the mainstream financial media.

Actually, the value of gold and silver haven’t changed at all. Ounces of physical gold and silver are still worth the same today as they were a month ago. What has changed is that the values of paper currencies, stocks, and bonds have mostly fallen in January.

In mid-January, the US Dollar Index reached its highest level since September 2010. This temporary strength resulted from the weakness in the Euro. The falling value of the Euro was related to the financial problems in many European nations, where sovereign credit ratings were dropped for at least ten countries in that continent within the past month. Governments such as France, Italy, Spain, and Austria were among those hit by credit downgrades.From its peak two weeks ago, the US Dollar Index has dropped 2%.

Investors are now not only afraid of the Euro, they are also afraid to hold US dollars. Last week, the Federal Reserve Open Market Committee announced that it was prepared to unleash new rounds of stimulus, also known as quantitative easing, which are just disguises for the inflation of the US money supply. In other words, the Fed promised to reduce the future value of the US dollar. People are figuring out that this is really what all the fancy words mean, and are already taking steps to find other safe haven assets.

The US and European governments have declared economic war on Iran, which is driving Iranian citizens to abandon their domestic currency in favor of dollars, gold, or other assets. In response, Iran’s government has announced currency exchange controls on January 28. The head of Iran’s central bank announced that all dollar exchange transactions must be conducted at the rate of 12,260 Iranian rials per dollar. At the time, the black market exchange rate was over 20,000 rials per dollar. The imposition of currency controls pushed down the black market rate to 17,000 rials per dollar.

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Posted by Silver Guru on Feb 1 2012. Filed under Silver Analysis. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry