Gold Takes Flight Amid Ongoing United States Uncertainty

Gold bars

Jeevan Robinson

Release Date

Tuesday, July 19, 2011


Are you looking to off load some cash into a relatively secure investment? Then perhaps you should consider investing in gold with the precious metal recently taking flight towards US$1600 an ounce.

In these uncertain times in the global markets, silver has also rallied, currently sitting at just over $40 an ounce.

The movement in these precious metals is not surprising to me at all. Paying attention to the global markets over recent years, there has been somewhat of a trend. I recall some years ago working in the City of London as a Business/Financial Journalist and then as an Investment Writer, whenever there was volatility in the global financial markets, investors reacting to negative news, most often rushed towards safe havens and gold was often the beneficiary of investors fleeing other asset classes and reducing their liquid holdings.

The global economy at this juncture, stands at a precarious position with the real possibility of a double dip recession stemming from the stubborn resistance we are seeing coming out of the United States in the ongoing talks over raising the debt ceiling.

The argument we are hearing is one that in a way defies belief but at the same time highlights the often hushed fundamentalism at the heart of US politics, mainly from the Republicans. It seems unfortunate that both sides are showing dogged resistance towards making the required compromises, or if conventional wisdom and all the analysts are to be listened to, then it is the Republicans who are shoving a stick up the US's backside in these ongoing debt talks.

What is going on many are asking? Why so stubborn in making a deal?

Irrespective of what both sides may be battling to preserve, one observation is clear and that is, the advent of Tea Party elected officials in Washington has adversely affected getting a deal on this debt issue. Republican leaders would perhaps like to do a deal, despite their staunch resistance but would any deal satisfy the extreme right-wingers in their party? Are they ready for serious compromise?

Politics can sometimes be very messy and in the cutthroat world of US politics there are often corpses at the end of the road when fighting along a path of policy based on stern ideological positions. Ideology has its place but in this instance ideology must be replaced by sensible, responsible and pragmatic politics. The United States defaulting on its obligations is not just a problem for the United States alone but it will be a problem for the entire world to be mindful and quite frankly wary of.

Daily, I have been following the feeds hoping that the news will begin to sound positive. Deficit reduction is welcomed as President Obama has been at pains to state but there must be a two-way compromise. It can be looked upon as both sides being stubborn and playing partisan politics. However, how can the Republicans expect to receive all the measures they seek in terms of cutting social programmes and other cuts that they have called for, yet they are refusing to be flexible on the issue of taxes. What I am seeing at play in the US is the Republicans expecting middle class America to pay for the folly of what they, through the Bush years, have saddled on the American people and by extension the world. Obama has been trying his best to fix it, yet they are raising hell on the President.

America will sneeze for sure. We must pray that the sneeze is just one to clear any blockage and not a sneeze of exasperation. For, if it is the latter, the cold that the rest of the world will catch will be an awful one.

I recall that time again when volatility was wreaking havoc in the global markets and coming from a position where the US dollar was doing very well, there was a swift reversal, as investors fled US securities and the dollar took a beating that it never really fully recovered from. Then came the global recession and the dollar has managed to hold on. This is thanks in part to the billions of dollars that was pumped into the markets and the swift move on interest rates by the various Federal Reserve Banks. This time around, it may not be simply investors taking to fleeing the dollar and US securities. We think we are seeing a crisis of confidence now? Come August 3, it will get even more dire if a deal is not done.

Both sides in Washington must secure a deal and they must do so for the long-term future of the US and the global economy. We know it has often been said that America's only interest outside of its borders is to protect its economic and military prowess. This time it has to be different. The world needs a US economy that is firm or shows signs of strengthening. A weakened US economy will be no good for any of us.

There is a party taking place where gold and other precious metals is the centre of attraction. Some of us have been invited to it and others of us simply can't afford to attend such an exclusive gathering. Dare I say this party won't last for too long if the United States' politicians do not get their act together before August 2nd.

Jeevan Robinson is Editor-in-Chief of MNI Alive. He can be reached at

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