deflationary spiral, page-6

First off John, thanks for your comments. Like you, I'm not sure we're at the bottom yet. It's worth going back to the performance of the Dow between 1929 and 1932 if you really want to see a deflationary spiral in all its glory. Very nasty, with wild swings over a few months of approaching 40% both up and down.

Surely today's political leaders will want to avoid this - in fact they have already said they would, by printing.

Now to Greece leaving the Euro. grahay4, in the short term, I think this may continue to spook the markets, taking precious metal prices down as well. Why? Not because Greece is important in an economic sense, but because where one leaves, others may follow. Spain is in a terrible state and must also be toying with the idea of leaving the Euro and having its own cheaper currency.

And if they leave, do the Euro states get their money back? Hardly, so the lenders suffer too. For example, nearly half of Italian debt is held by French banks. A real house of cards.

However, central banks such as the ECB will have to come to the rescue in terms of more accomodative economic policies. This is when gold will come into its own as the classic store of value. Don't forget too that there are other issues good for gold in the medium and longer term.

USA has an election in November, Europe too have elections forthcoming in Germany and Spain, which adds to the uncertainty. No politician is going to be re-elected on the promise of austerity. Example, France's new president and a promise of less austerity, or even the Aussie Labour party's latest handout budget in anticipation of next year's election.

Then too there is the Middle East tinder box, with worsening relations between Israel and Iran. Gold rises when wars are in the offing.

My own opinion is that the further gold falls, the more it will rebound as its true value comes to be appreciated. When that will be is hard to know, but you would think that governments and central banks dare not wait for too long. Meantime, there are some bargains out there. We hope MYG is one of them.

Hope this helps

Cheers Bob