Market participants are very concerned and began to worry no agreement is reached among the U.S. politicians. The threat of default in the U.S. is getting closer. But, how exactly to do with the price of precious metals?
Julian Phillips, an analyst with GoldForecaster, trying to link the two. It must be remembered, not the center of U.S. gold consumer. In fact, the consumption of jewelry, gold bars and gold coins across North America is only 8 percent of global consumption. Europe and Russia occupy the portion of 13 percent. The rest are in developing countries, especially China and India.
Developing countries is responsible for the distribution network and global gold markets. Physical gold supply largely brought to London and the bank storage of gold.
The gold was shipped from the processing of gold processing gold and silver. They get the goods from the mines. Then gold depositary bank generally through London GoldFix and give his gold to investors, manufacturing, industrial, and central banks.
Not only that, developing countries are also forming gold speculators and traders who constantly buying physical gold, gold stocks in the form of mutual funds exchange traded fund, or a derivative financial instrument that could affect the price of gold.
The rise in gold prices lately totally unrelated to the fundamentals of silver and gold. The increase was triggered by fears shook the financial world and the declining U.S. dollar exchange rate. Precious metals are used as a means to counter those risks.
The increase in the price of gold and silver actually reflects the uncertainty and instability in the foreign exchange market and the decline of paper currency. The main impact of the event of default if it is true in the U.S. is that it will menguncangkan monetary system in developed countries. Chances are it increasingly made investors look for alternative long-term investment.
Damage to the monetary system was not easily repaired. One of the consequences will be no acceleration of the internationalization of the Chinese yuan that China will be able to reduce the vulnerability and dependence on the U.S. dollar internationally.
Another consequence is going to happen divesifikasi national asset in the long run. Unlike this time, too many assets are placed in U.S. dollars and U.S. government bonds.
Another consequence is global stagflation, global economic fragmentation that might lead to protectionism. Still prolonged conversation about the debt ceiling in Washington have made a sagging U.S. dollar exchange rate against other strong currencies like the yen and euro. It was the first impact is most felt.
Furthermore, countries that do not bear the strengthening of their currencies as the Japanese yen will conduct a series of actions. Earlier this year, the Japanese central bank intervened to weaken the yen market. The strengthening yen is not beneficial to the exporting country because the price of their goods to be expensive.
Similarly, the Swiss franc. If default does occur, other impact is the interest rate the U.S. government bonds because bondholders assess the risk becomes higher.
The increase in interest rates would disrupt the stock market, housing market, and ultimately the economy as a whole. This is exacerbated by high energy prices and food, is equipped with a high unemployment rate, thus making the weak economy.
Assets whose value continues skyrocketed in such circumstances is an asset that can serve as cash and assets. His name is precious metals. Precious metals demand from developing countries that continue to rise will make the price of precious metals continue to rise to a new level because the world is looking for new balance.
Internationally, the precious metal deposits will be controlled asset, not only is it important. The price will then be closely related to the total volume of each foreign currency in the world.
As envisioned, the price of precious metals, including gold, will be higher than original estimates. With the gold market is still very small in terms of volume, the silver will be a monetary metal, too, certainly at a high price.
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