Gold prices skyrocket as investors lose confidence in US and European currencies

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by a Newsnet reporter

With euro-nations debt ever deepening, investors faith in world paper currencies, especially the US dollar and the euro has departed and headed straight towards that iridescent yellow metal so beloved of the pharaohs. Gold is at a very high level and few economists will bet against it exceeding even the 1980s record value of about $2,400 at current prices.

The euro countries: Greece, Italy and the UK are all deeply in debt.   Italy has nearly as much debt as Greece and the UK just announced an official debt of £2tn+ with a possible hidden debt total of £4tn+ according to the UK Office for National Statistics.  The £4 trillion by the ONS accounts for total Government indebtedness including the debt placed on future generations. 

It is not however, just the total amount of the debt that is alarming but it’s rather the ratio of debt owed by a country compared to wealth generated by that country that spikes fear from investors.  The USA has a national debt of $14tn+ and currently needs to borrow more if it is not default on its debt repayment and risk losing its AAA credit rating (A+ from China). 

Why with all this debt the USA still has a AAA credit status is explainable by the relatively high amount of wealth the USA creates annually compared to its debt levels; whereas the poor credit ratings of Greece (CCC from China) and Italy (A- from China) are a result of relatively low wealth creation with respect to their current and long standing high debt levels – it’s important to note the UK (A+ from China) is not far behind them on the debt to wealth ratio scale.

The markets fear the European financial system will collapse under the weight of the Eurozone’s sovereign debt crises and the massive financial bailouts given to Greece, Italy, Ireland and Spain may contribute to other countries with larger economies in Europe defaulting on debt too.

Since paper is worrying, it is no surprise then that gold has become the safe haven investment for financiers with wealth to secure, all that glitters is indeed gold at the moment. 

So, if one has money to invest perhaps buying gold jewellery is more than just a pleasing aesthetic accessory in these troubling times.