The price of gold dipped a little bit after the election mayhem in Europe over the weekend. Nonetheless there was still a very telling upsurge in terms of safe haven demand for the precious metal and you do not have to look any further than Europe to understand why this is the case. It is putting it mildly to say that Europe is in tatters at the moment and there are more signs that Greece is just the start of a much larger crisis.
The situation in Europe continues to worsen, which at the same time makes gold investing look a more and more appealing proposition. The chief economist and strategist at the Toronto based Gluskin Shelf & Associates, David Rosenberg, bluntly states that Europe is a mess economically, fiscally and politically. The leaders in Europe have for some time now been pushing for austerity measures, measures which it has become painfully obvious have not only not worked, but may even have actually made the problem worse than it was before.
JP Morgan’s chief market strategist, David Kelly, says that immediate austerity measures in recessionary economies just don’t work. In the past, stimulus payments have resulted in growth – the revival of the automobile industry in the United States in recent times is proof enough of that – although there are multiple causalities in the Euro-Zone. Austerity measures are hardly likely to successfully grow Greece out of its debt situation, especially when as many as seven other economies in the Euro-Zone are likewise in recession.
The really telling thing however is the back seat that Greece has taken of late, with others stealing the limelight in an indication of just how much the economic disruption is expanding. Spain has started to become the new Greece, with unemployment now among the highest in the developed world at twenty four point four percent, with the great majority of the affected being those in their early twenties, the future generation. The banking sector in Spain is also deteriorating rapidly, with the county facing widespread political unrest and Standard & Poor downgrading their sovereign credit rating to BBB+.
Also in recession are Belgium, Italy, Portugal, Slovenia, Ireland, the Netherlands and Greece, with the Czech Republic, Denmark and now the United Kingdom joining the list outside the Euro-Zone.
While the US dollar, US treasuries and German bonds continue to be seen as safe havens that could change as the Euro-Zone crisis grows. Gold could be set for another bull cycle.