For anyone holding shares at the moment, its been a rough couple of days – but not for Gold and Gold ETF owners.
The markets have been in free fall since S&P downgraded the United States long-term credit rating to AA+. This downgrade has a number of knock on effects that we’re only starting to see now. For example, many pension funds and other “safe” investments can only hold “AAA” bonds, so those funds may have to begin off-loading their Treasury Bills. The re-insurers will also be forced to increase their spreads on Treasury Bills to account for the “heightened” awareness of risk that the downgrade has given them. Once the re-insurers increase their prices for underwriting loans, then interest rates will start to go up which is exactly the opposite of what the United States economy needs right now.
This unfortunate scenario is exactly why holders of Gold and Gold ETFs are going to benefit. These changes have the capacity to create abnormal inflation and this could erode the value of the US dollar dramatically. As the dollar falls, anyone who’s holding Treasury Bills or actual cash in US Dollars will see their wealth begin to be rapidly eaten away by this out of control inflation. More and more people will run to Gold and securities like Gold ETFs that are backed by Gold. We’re already seeing some of this as over the past three weeks we’ve seen gold go from $1500 per oz. to over $1750 per oz. – a greater than 15% increase in about two weeks.
I think it is imperative that you get a grip on what’s happening in the resource ETFs sector today. I am a regular reader of the Gold and Oil Guy Newsletter because I know that I’m getting my news from real people, not newscasters and talking heads. If you’re serious about protecting your wealth through Gold and Gold ETFs, then that newsletter is the place to get a good start.
*Disclaimer – The author is not a Professional Financial Advisor and this commentary is opinion, not financial advice. Before making any investments of your own, seek out the advice of a qualified Professional Financial Advisor!