BuyBullionz

Gold

Gold is a trade, and it’s an increasingly attractive trade. As a store of value, gold beats currencies, which as James Grant notes are “faith-based.” The soaring budget deficits of the United States, especially combined with the bloated public spending promised by health-care “reform” and climatalogical alchemy, presage considerable inflation in the years to come. Gold, foremost among the commodities, will protect against that.

But meanwhile gold is the proverbial falling knife you are wise not to try to catch. Since Nov. 27, when gold was trading for $1,180 an ounce and I warned that it was certain to fall, it has indeed fallen, to $1,120 at midday Dec. 9. The investible form of the metal, SPDR Gold Shares (GLD), was trading Dec. 9 for $109.97, well below its long- and short-term moving average.Back in that Nov. 27 post, I said that global uncertainty was likely to shake up financial markets globally.

Gold prices took off early in the day as reports from the European Central Bank said the banks in the region could experience another round of loan losses, this time up to $237 billion over the next year and a half.

The uncertainty of the economic fallout from Portugal, Italy, Ireland, Greece and Spain have investors concerned over how deeply it will impact the economy, and how far it'll spread to other nations, making gold the choice for those looking for safety.

News that China manufacturing dropped in May also reminded investors of some of the vulnerabilities there which could dramatically reduce economic activity there and abroad.

Gold futures were trading at a two-week high Tuesday in response to the news.