“The Fed’s Horrendous Error on Interest Rates” Will Make Gold Sparkle
The fed has put the economy in a dangerous position, market bubbles are forming. Is gold a smart option and what will this mean for the future of the yellow metal? Read further here.
This week, Your News to Know brings you the most interesting news stories about the gold market and the state of the economy. Stories this week include: Reasons to want gold over NASDAQ right now, and 7 outrageous examples of India’s obsession with gold.
Peter Cooper asks: Why would you want to own stocks rather than gold?
The recent optimistic jobs report might have moved the Fed closer to raising interest rates, but Peter Cooper views the current situation as “pure gold” for the precious metals market, rather than a predicament.
On Gold-Eagle, Cooper explains how the decision to raise interest rates will negatively impact all markets and explode the global economy. Right now, we are in a stretched-out bubble: over-borrowing on a global level, and all the major asset classes remain hugely overvalued and heavily dependent on the low interest rates over the last nine years.
“Raise interest rates and you prick that bubble, not just in the US but worldwide,” Cooper warns. Both the International Monetary Fund and the Bank of International Settlement have advised the Fed against an interest rates hike as it will tip many national economies over the edge, but their warnings seem to have fallen on deaf ears.
The case for precious metals is made further when examining the present and future of various economies: the economic slowdown in China and the recession in Russia is hurting German industry, South Korea’s exports fell by 12% and Japan’s are down over 20%. The response of central banks from Europe to Asia has been unilateral: print more money, and worry about the consequences later.
This puts a lot of strain on the U.S. and its dollar as the sole engine for global economic recovery, and yet the greenback is overpriced and will actually prove detrimental to the U.S. economy – more expensive U.S. products mean less exports since other countries can’t afford them. Thus, Cooper finds that the recent jobs report is the climax of a “tepid” seven-year cycle, rather than the start of a new one.
But if the dollar will grow even more overvalued, why not turn to it as a safe haven instead of precious metals once the Fed’s rates hike plunges stocks, bonds and real estate into trouble? To answer this, Cooper draws a lesson from history: “If we look back to the last global financial crisis then it was not the dollar that offered the best performance after the dust had settled in March 2009. Gold and silver shot ahead for the next two years, and that was the best place to have your money.”
Cooper believes that the second round of the current crisis is coming up as soon as December 16th, and will carry with it even bigger unknowns. Stocks and other assets are at their cyclical peaks, and will soon experience a major correction or crash caused by the very same leverage effect that propelled them to high valuations. Meanwhile, gold and silver are settling back to their “launch-pad for a huge rise in prices”, the catalyst of which will be no other than what Cooper calls “the Fed’s horrendous error on interest rates.”
7 outrageous examples of India’s obsession with gold
For an example of India’s love for gold, one needs not look past any of the nation’s festivals, weddings or even its dress code. However, Mashable’s Sonam Joshi rounds up 7 of the most lavish examples of why Indians could truly be called “obsessed” with the yellow metal.
- With an estimated $15 billion of wealth, the Padmanabhaswamy Temple is the richest place of worship in the world. In 2011, researchers found a treasure trove full of jewelry and similar objects along with 100,000 historic gold coins in the underground vaults, with many more riches yet to be uncovered.
- The Tirupati Temple follows close behind, and was once considered the richest temple in India. Its wealth currently sits at 4.5 tons of gold deposited in the temple’s banks, with another 80kg added every year in the form of devotee offerings.
- Businessman Datta Phuge holds the Guiness World Record for the world’s costliest shirt, which he got in 2013. Unsurprisingly, the 3.32kg piece of attire is made from gold – it took 15 craftsmen 16 days to make and ended up with a $240,000 price tag.
- Like the richest temple, the man with the costliest shirt also has competition. Politician Pankaj Parakh celebrated his 45th birthday in 2014 with a shirt made from 18-22 carat gold. While it cost slightly less at $213,000, it was made by 20 artisans over the span of two months.
- Pune businessman Sachin Khese wrapped his black Jaguar in gold earlier this year, an endeavor that cost him around $5,000. Khese claims he did it to ward off bad luck.
- Known for their budget Nano vehicle, Tata Motors went the other way in 2011 and unveiled a luxurious version of the model which was crafted using gold, silver and gems. Aside from various gemstones, 80kg of gold and 15kg of silver went into the car’s construction.
- Part of Bollywood music composer Bappi Lahiri’s fame comes from his numerous gold chains, many of which come from shrines around the world.
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