As trader’s return from their vacations and markets regain their volume, the fluctuations in the stock markets can be put into perspective.
 

There can be no doubt that the US has entered into hard times, and it can be expected that
history will repeat itself with other western stock markets following suit.
 

Already signs of weakness in the UK housing market have become apparent, the previously buoyant housing sales in Spain have stuttered to a virtual halt and similar signs elsewhere in the western world are developing. 

 
This foretells a further weakening in worldwide stock markets as the debt crisis develops.

 

The efforts already made by the US, and to a lesser extent the EEC, to stem the melt down process has resulted in ongoing dollar weakness that is likely to continue to a level we don’t want to think about.

 

On a more optimistic note, we are of the opinion that China, India, Russia, and probably Brazil have sufficient newfound domestic economic strengths to continue to prosper as their citizens aspire to better lifestyles and, as a result, the performance of their markets will not be influenced to the same extent as the established western markets.

 

As followers of the performance of precious metals over the last two months are well aware, gold has at last broken out of the $660-680 range in the last week.

 

This has occurred for four main reasons,

 

• The first being profit taking by the major investment houses and hedge fund speculation through to the individual players under pressure to meet their obligations, and that now seems to have weeded out the weak.

 

• Secondly the continuing sales by central banks seems to have been mopped up and efforts to restrain the price have been overcome by aggressive purchasing from Asian and the oil producing nations worried by the declining value of their US dollar instruments and cash.

 

• Thirdly the re-awakening awareness of gold as a store of value, hedge against inflation and the realization that gold, and other precious metals, are likely to have considerable upside in the foreseeable future, not forgetting the supply shortfalls.

 

• Finally the timing factor, historically gold has has stayed quiet during July and August for years, followed by a burst of activity in September and October as the Indian jewelry giving season gets underway, and this year being the Chinese year of the pig when it is considered good fortune to give and receive gifts, particularly gold.

 

Demand from these sources alone is increasing year on year as both nations have rapidly growing and increasingly affluent middle classes.

 

One further indicator that we really like. Visitors to this site will be aware of the traditional habit by precious metal and uranium producers of hedging a significant proportion of annual production by agreeing to sell in the future at a fixed price to insulate them from market fluctuations.

 

This activity insures them from producing and selling at a prevailing spot price that incurs a loss.

 

We learn that Barrick Gold Corp the largest of the miners has unhedged all production, the surest sign yet that industry insiders are very bullish on gold.

 

Our take is that by the new year gold will be at $800 an ounce or thereabouts and if, as we suspect, recession takes hold and progresses, the price will continue onwards and upwards.

 

A last final recommendation, if you are not into silver get in now while it is still off its previous highs.

 

Silver will be dragged along in the wake of gold, it enjoys many of the virtues of gold such as supply shortfall, store of value etc and additionally is finding more and more uses in industry and medicine due to its unique properties.

 

There is a lot of upside to come!  

 

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