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August 16, 2007

What will the credit crisis ripple effect do to the gold market?

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"Now the credit derivative implosion problem has worked its way into the commercial paper market which since last week has declined by $90 billion."

"If you want a comparison of the last time commercial paper dropped by a number like $90 billion, in 2001 the Fed promptly dropped the discount rate by one full point.

The system financially is hanging by a thread. Of the total $2.2 trillion, $1.2 of the commercial paper market is mortgage backed. Action is either taken by Professor Bernanke immediately, or Bernanke is a reincarnation of Nero and the US is standing on the "Burning Platform" as the Financial Times said last week. No action and very soon you can kiss the US economy goodbye for at least a generation, maybe longer.

What has occurred here is just what has been anticipated that completes the foundation of gold at $1650 or better. At this point actions to hold the financial system together is bullish for gold and to leave the problem alone as Bernanke and Poole rhetoric implies is the blast that will launch gold higher."

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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