Debt Crises & Economic Fragility Around the World: Is There a Better Reason to Buy Gold Right Now?

Debt crises in Greece, the rest of Europe, and the U.S.; economic fragility in the BRICS countries—all of this points to gold as the best possible investment at the moment.I find it absolutely laughable how Prime Minister George Papandreou needs to hold a national referendum to determine if the country’s citizens want to accept another $150 billion or so in emergency capital in order to repay Greece’s initial bailout from its debt crisis. I mean, we are talking of survival here for Greece. What is there to discuss? Let me put it this way: can you imagine being on the brink of losing everything, your own personal debt crisis, but someone pops up and says, “Don’t worry; I have money for you, even if you may not be able to pay it back?”

What really is disturbing is that the vote may not happen until early 2012 despite the European Union members now telling Greece that there will be no changes to its budget cuts and it needs to happen or no money will be advanced and the country will default. The uncertainty will impact the stock market until there is a concrete and workable resolution to Greece’s debt crisis.

In addition, the one-year Italian bond surged nearly 50% to yield 5.17%, as worries mount that the country could default. Yields relate to risk and rise to compensate for buying higher-risk debt. Bonds in Germany offer much less yield—a reflection of the lower relative risk.

My feeling is that gold continues to be the place you need to have capital given the market risk and continuing debt crisis. After the failure to hold above $1,900, the metal has struggled to find direction on the charts and has traded with little sense of direction at around $1,600 to $1,700.

Besides Europe, don’t forget the crippling debt levels and deficits in America. The powerful U.S. economic engine continues to show breaks and is stalling at this most critical time for the country.

We are also seeing some economic fragility in the BRICS countries. Brazil, India, and China are seeing some stalling in their economies and stock markets.

Buying has been driven by a combination of speculative trading in physical gold, gold ETFs, and buying as a safe haven investment.

Lombardi Financial initially turned bullish in 2002-2003 and has remained so ever since. Although at times the bullion has had a rough ride, prices have turned around significantly after first breaking above $400.00. We believe the spot price of gold will take a run at $2,000 by 2012 should the global economies and risk continue.

The simple truth is that gold is a trustworthy and realistic investment instrument that should be in every investor’s portfolio. Gold’s traditional role as a safe haven has made it the underdog in the world markets. It is an investment that people turn to only when stock or bond markets aren’t performing well, or when monetary policies are running amok. Yet, there is a sense that gold may be increasingly seen as a credible and realistic investment vehicle and not just as a safe-haven instrument for parking capital.

In the current climate, gold represents the best bet, while silver continues to be a trading commodity based on the economic recovery and demand for electronics and industrial applications.

My advice to you is to buy a mixture of exploration-stage miners along with small to large producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large producers. The SPDR Gold Trust ETF (GLD) is worth a look.

I think Europe is a mess and you can read my comments in my recent article, Europe: It Needs to Get Its Act Together.

And with Black Friday in a few weeks, retailers are hoping for buyers, but it will not be easy. You can read about this in Former Retail Superstar Struggling in Weak Market.