Why the Bull Market Is Far from Over
Source: Julian D.W. Phillips, Gold Forecaster - Global Watch (5/9/08)
Some talk of the end of the credit crunch. Some say that the gold bull market has suffered severe damage, which will affect its long-term prospects. If we were to accept these statements then it would appear that the gold ‘bull’ market is over. But are these statements acceptable and do they reflect the true picture underlying the gold [and silver] markets?
Is the Worst Over?
• Credit Crunch?
Not according to the I.M.F. An assessment by the International Monetary Fund that potential losses as a result of the credit crisis could exceed US$1 trillion, including warnings that further losses and write-downs on prime mortgages, commercial real estate, leveraged loans, and consumer finance were likely. The IMF’s Global Financial Stability report put credit market losses at USD945bn, as of mid-March, with more losses expected for months to come. The report also stressed the fact that the credit crisis was impacting the full spectrum of the financial market in one way or another, with losses distributed between banks, insurance companies, pension funds, hedge funds, and other investors. We note that credit card finance alonside car finance has been included in assets acceptable to the Fed as collateral, which tells us it is not over by a long shot.
•U.S. Trade Deficit
February recorded a Trade deficit of $62.3 billion against a January deficit of $59.0. This still looks like a $720 billion deficit to us and with oil prices now at over $120 a barrel and Chinese imports still cheaper than local products and flooding in, the prospects are for a worse annual Trade deficit than ever before. And there is no real sign that this deficit is dropping.
With OPEC talking of a potential oil price of $200 a barrel something has to be done to stop more than a decline in the $; a stop must be put to the massive global scramble for resources by a combination of the developed world and the emerging world, because prices will continue to rise until they are so high that some will have to do without. This problem is about the massive rises in demand with far greater ones to come.
So are there solutions in the pipeline? It seems that the only solutions available to the authorities are existing market controls and proposed market controls on all types of markets, but not on a globally coordinated front. Unless there is global coordination such control will be completely inadequate.