We have been seeing gold, silver, oil and other commodities going up for a considerable period of time. I want to talk a little bit today on my expectations for further direction in the market. Ben Bernanke declared that recession of 2008 is over. He and the rest of FED together with the Congress and the Senate decided that the best way to put global economy back on track is to stimulate it by pumping it with printed money. We should also not forget that the money that is thrown into economy is debt based. So, the debt will be put on the shoulders of taxpayers.
I have been looking at the areas where the printed money was distributed in the economy and saw that much of it was used for creating new working places. Unfortunately, most of the positions were not stable places in manufacturing or other places that create additional value, but merely short term projects. It was also somewhat strange to see the attempt to stimulate construction sector, which still has a few million of unoccupied houses. Why stimulate it? Let the market clean up, reach the bottom and then start going up.
Anyway, when so much money is poured into economy and there are plans to pour out more, you can be sure that at some point inflation will skyrocket. It won’t start very quick, but after some time it will start rising pretty fast. Where do you think you can invest when inflation starts rising at an alarming rate. Definitely not in stocks as high inflation makes it difficult for companies to borrow money for working capital and investments due to high interest rates that usually stay very high when inflation is raging in a global economy.
So, where would you want to invest? You would want to invest somewhere more tangible and not some paper securities. You would want to invest into things: gold, silver, oil, rice, sugar and etc, which are commonly known as commodities. Oil usually precedes any inflation as high prices of oil cause all prices of products and then services to go up, because all global economy is tied to prices of oil. It is a global currency, which reflects the prices of products in most market sectors. So, when inflation starts picking up people get worried about their wealth as it starts disappearing as snow which melts at the beams of spring sun.
Investors seeing the situation start putting their money into commodities, mostly gold and silver as these protect your money and wealth best from raging inflation and also help you to increase your capital immensely. So, if you asked me how long commodities are going to rise, I can tell you, as long as money is printed and economy is stimulated artificially with paper stuff that loses value on a daily basis. Therefore, I would encourage you to think how you could protect your capital. In my opinion, it is by investing in commodities. There will be retracements, which will give you good opportunities to enter the market. I believe you should do it. Good luck in your investments.
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