Gold is in the midst of a massive selloff, and even hit a new two-month low earlier today, as cash starved investors sell, sell, sell in order to gain cash. So what should you do? You may want to consider buying gold while it is low, as the chances are it is going to spike back up again based on global economic fears.
There is some good news on the Europe debt situation (Greece), because of speculation of a massive bailout plan that may come to pass. Speculation and hopes are building that a massive multi-trillion-bailout plan is being prepared to save the Euro zone.
The plan would include a recapitalization of Euro banks via private funds or by the European Financial Stability Facility (EFSF). The EFSF may also be leveraged in order to provide more resources without having to receive approval by national parliaments.
This is similar to the plan Tim Geithner discussed on September 16th in Poland. ECB board member, Lorenzo Bini Smaghi, explained that monetary officials in Europe have already begun to discuss the next steps to take in solving the debt crisis.
If the bailout doesn’t come to pass, then you can expect a domino like effect to hit Europe, because if Greece falls, others will fall as well. This is disturbing news to say the least, as America would more than likely be faced with another recession if Greece defaults.
The IMF released a statement over the weekend that read:
“The global economy has entered a dangerous phase, calling for exceptional vigilance, coordination and readiness to take bold action from members and the IMF alike. We are encouraged by the determination of our Euro-area colleagues to do what is needed to resolve the euro-area crisis. We welcome that the IMF stands ready to strongly support this effort as part of its global role.”
All this is a lot of information to take in, especially when you consider how this affects gold. One can’t really say one way or another how Europe’s debt issues will affect the overall state of gold.
On one hand, it could send gold to price levels never seen before, well over the $2,000 an ounce range because of investors and others trying to protect what precious money they have left.
On the other hand, we all know that cash is king, so investors may want to continue with the current selloff to gain any form of cash they can, especially if we head into another recession.