Former finance advisor to Barrack Obama, Larry Summers, has warned that low interest rates and quantitative easing will damage the economy further down the road. The leading economist says the Federal Reserve’s decision to stimulate the economy will lead to “income inequality.”
Summers is not alone in his criticism of the Fed’s stimulus program, and with the world’s leading central banks – other than the ECB – opting for the same policy, economists fear the global market is in for another drilling.
Investing in precious metals will allow investors to offset losses you will lose due to low interest rates, and when the economy does collapse you will be in a good position to cash in on rising bullion prices.
Precious metals such as gold and silver always perform well when currency loses value, and with the current stocks dangerously overpriced, market analysts sense there is little to gain from investing in equities.
Market sentiment is with gold today, with prices rebounding back towards the $1300 threshold from yesterday’s closing price US$1291.90. Mixed US data and continuing concerns over Ukraine continue to effect the market.
Gold had looked set to fall in value this week, but attacks on Ukraine forces which killed 11 soldiers and injured another 30 pushed prices up again. It appears the crisis will not go away and although a referendum is scheduled for Sunday, the results could spark more violence.
India’s central bank has also lifted restrictions on gold imports in a move that will favour the newly elected Bharatiya Janata Party (BJP). The new government is said to favour commerce and are small business friendly, but the easing of gold imports only apply to “select trading houses.”
Although the relaxed rules will improve sales of physical gold in India and boost precious metal exports, only the premium trading houses that deal with large scale balances will benefit, but will have a positive effect on increased gold prices.
Rising sun in the Far East
Signs of recovery in Chinese and Japanese factories however offer a glimmer of hope to small time investors looking for lower prices on precious metals. The Manufacturing Purchasing Index in China gained 1.8% and indicated the slow-down is gathering momentum.
The news was welcomed by Asian traders with a massive sell-off on gold which saw the yellow metal plummet to $1284 an ounce, before uncertainty in Ukraine rattled traders to hedge against risk-assets.
All in all, the global economy is on the road to recovery which will bring the price of gold down to attractive prices, but with so much instability underlying the market, the economy will collapse again in the not-too-distant future.
Savvy investors back gold in preparation for a financial crisis as precious metals outperform other investments during times of economic instability and hardship. To protect your financial future head over to coininvestdirect.com today and check out the latest deals on gold bullion.