Gold Represents Risk Aversion Stability: Bailout Won’t Do Anything For Failing World Economies!

Unlike Europe, the US holds an organisational advantage in its ability to put together a structured and coordinated rescue plan; however, a coordinated bailout plan or European ad-hoc bailout, neither will do anything to stop the worsening global economies.

Monday trading has started with yet another dramatic slide in global equities with investors growing ever more nervous; sentiment is unlikely to recover anytime soon despite the bail out plan.

The global problem has gone far beyond a banking crisis with “real economy” data showing sinking world economies.  US job losses have hit a 5-year high and the major European economies are either already in recession or soon to go into recession.  A survey of manufacturers showed falling orders throughout the developed world and everywhere you look the story is one of negativity in terms of balance books and sentiment.

Europe’s situation is particularly vulnerable, while all eyes have been on the US bailout plan Europe’s lack of coordination has done little to bolster confidence in the European banking sector.  Last week six European banks had to be rescued and Germany’s Hypo Real Estate will be the next major European bank to need state intervention.

The German government has sought to restore confidence with a blanket bank deposit guarantee, but instead it has just highlighted the depth of the problem and created confusion.

Risk aversion has risen to the top of the agenda forcing investors to reconsider all of their traditional safe haven investments, while at the same time the dollar has gained ground over the euro and pound meaning that straight currency investment is also not considered safe.  In the UK tens of thousands of savers are now seeking ways to move their cash from the UK banks to Irish ones to benefit from savings guarantees.

All in all many investors seem to have just moved out of currency based safe haven investment altogether.  This has resulted in unprecedented demand for bullion and gold coins as ore people have been opting to place their assets in the commodity which has a strong historic record during global turmoil.