Friday, May 22, 2009

Could the U.S loose its AAA rating like the U.K.

Buying Gold may become more widespread as the economy starts to recover, it has been suggested.

In a report compiled by BNP Paribas, strategist Andrew Chaveriat said that Gold Investment interest may rise on the back of inflationary fears over the coming months.

Gold is traditionally seen as a safe haven in times of economic uncertainty, and the decision of governments to use quantitative easing to stimulate their national economies has prompted concern that recession could be followed by a period of inflation.

"Longer-term inflation worries will continue to shape demand for gold," Mr. Chaveriat confirmed in the report.

According to Bloomberg, Mr. Chaveriat went on to predict that gold would make a "creeping advance" towards record price highs, marking the yellow metal out as a sound long-term investment.

He noted that chart patterns hint a level above $1,000 could be achieved within the next few months.

Meanwhile, a UBS report indicated a "bullish outlook" for gold with prices moving in a "positive but slowing way", Bloomberg states.

Given verbiage from Fed Chief Ben Bernanke and others, it would seem as though the US economy should be on the road to recovery by the end of the year. This suggests that safe-money investors who jumped out of stocks and other risky investments may pull money from gold when they are more comfortable in growth investing.

However, there is still some uncertainty over recovery prospects in many major US market sectors. Hopes for a housing rebound took a hit Tuesday (May 19) as new home building saw its all-time low water mark. There is also still unease about the credit sector. The US car industry is in constant turmoil. Unemployment is near 9 per cent. So, all is not well again in the US economy.

Immediate-delivery gold was little changed at $952.45 an ounce at 12:27 p.m. in Singapore after touching $956.55 yesterday, the highest since March 23. The metal has climbed about 7.2 percent this month and is about 19 percent higher than this year’s low of $802.59 an ounce. Silver, which dropped 0.2 percent to $14.49 an ounce, is still up 3.5 percent this week.

Bill Gross, co-chief investment officer of Pacific Investment Management Co. in Newport Beach, California, said yesterday that the U.S.’s top AAA credit rating will “eventually” be lost. “The markets are beginning to anticipate the possibility of” a downgrade, Gross said.

The Dollar Index, a measure of the greenback against six major currencies, has lost 3.2 percent this week on speculation that the U.S. government’s creditworthiness may be weakening, after Standard & Poor’s yesterday cut its outlook on the U.K.’s AAA credit rating to “negative” from “stable.”

“Investor interest in gold was bolstered by the declines in international equity markets and the soft tone of the U.S. dollar,” David Moore, chief commodity strategist at Commonwealth Bank of Australia, said in an e-mail today. What this means for the average investor basically short term you can trade around the gld or do a more sophisticated trade like the I did making 43% return for the month update on the GLD trade take a look

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