Sunshine Profits

Is Greece the canary in the coal mine? Less than a week after European leaders crossed the T’s and dotted the I’s on the debt-restructuring plan for Greece, the prime minister’s ruling party called for a surprise referendum on the E.U. debt deal.

The yellow metal, money for more than three millennia, has a close relationship to other forms of money. Some argue that it isn’t gold that has risen in value in the last decade, as much that fiat currencies have lost value against gold.

A recent International Monetary Fund report estimates that China exports more inflation to the developing countries than had been previously assumed. For every 1 percentage increase in Chinese inflation, the increase in Asia-Pacific countries is 0.25-0.5 percent.

Whenever gold prices rise or decline the headlines give a flavor-of-the-week reason—the dollar is up, the dollar is down, the eurozone is in trouble, it’s the latest jobs report, etc.

At the beginning of the year Brazil warned that the world is on course for a full-blown “trade war” as it stepped up its rhetoric against exchange rate manipulation.

No good news to deliver so far this year on the eurozone. Just this week Slovakia’s government became the first in the eurozone to fall over opposition of bailing out indebted economies after the country’s parliament voted down approval for enhancing the zone’s rescue fund.

The news over the last few weeks, including worries about a possible major banking crisis could cripple the Eurozone economy as a whole, has sent global financial markets down heavily.

There are times when we need to have the courage of our convictions, even when we are losing money in the process. (That’s where the courage part comes in. Like Ernest Hemingway said: “Courage is grace under pressure.”) We are still bullish on the precious metals sector in both short- and long term. Although the whole sector moved lower again early this week, important support levels remained firm. Many of our readers are probably concerned, as it is easy to get emotional at times of uncertainty.

Recently, investors have suffered an average market decline of 6.5% in the equity portion of their investments, the largest fall since the dark days of October 2008, with $1 trillion of paper wealth evaporating in the process.

Although we had described the fall in precious metals prices, we can understand the shock for those who had gotten used to the idea that gold prices only go in one direction—up.

Ever wonder what it would take for Greece or the other debt ridden nations to leave the euro? According to a UBS report there are no such provisions.

Conventional wisdom has it that there are three safe haven currencies—the Swiss Franc, the Japanese Yen and the U.S. dollar.