Borrowing from an article over at ZeroHedge, it seems that a certain bank with the initials of JPMC believes that the failure of the Portuguese government is now imminent, and will likely happen this week, and possibly as early as tomorrow. This probably will have little negative effect on the price of gold, even though it's likely to spur dollar buying and an increase in the USDX, because the USDX has had only a marginal effect on gold prices as of late, and very little effect on silver prices. The probability of "panic" gold buying and strong upwards movements in gold if the government of Portugal does fail cannot be discounted. So, we'll just have to wait and see how things play out this week. One thing is certain though, a default by Portugal most certainly will not bode well for the S&P 500, since it's already trending downwards sharply, and a Eurozone sovereign default clearly flies in the face of the (ludicrous) belief that there is any sort of economic recovery occurring, anywhere.
In other financial news, inflation fears seem to be spreading beyond the control of the Federal Reserve. The Fed has long postured that inflationary pressures would be "transitory." Nevertheless, finance professionals around the world are starting to seriously doubt the Fed's ability to limit inflation to their target of 2% annually. Meanwhile, on the other side of the pond, inflation levels in the UK have skyrocketed to the highest levels seen in 20 years. This news, while bad news for consumers, is very good news for gold investors, since gold is always seen as the last refuge and protection against rampant inflation.
Finally, in yet another sign that Wall Street banks are not only entirely clueless to the fact that they are currently vacationing aboard the Titanic, but also expect endless government handouts in the form of Quantitative Easing ("money printing") to infinity, Bank of America is painting a rosy picture of an S&P 500 on target to hit 1400, just as soon as it drops 10% more. I wonder precisely where optimism ends and delusion begins?
Turning our attention towards our investments, we see that precious metals did fairly well today. Gold is slowly but surely creeping back up to the highs we saw earlier this month, while silver continues to shred anyone and anything that tries to get between it and $50/oz, closing at a new 30 year high of $36.38, up a staggering 16% since the beginning of the year! Had we not been saddled with such stiff 5% premiums on our precious metal purchases, today would have marked the second consecutive day that our gold and silver investment traded in the black (-4.6% yesterday and -4.2% today).
Our Vanguard 500 Index fund (remember, it's based on the S&P 500) continues to trade sideways, this time losing 0.3% and edging back into the red. Look for the possibility that our metals may surpass our Vanguard 500 Index fund within the next week or two, if BofA's predicted 10% drop in the S&P 500 does indeed materialize.
That's all for tonight, but I'd like to remind you that if you haven't yet had a chance, please check out my post from last week, Are precious metals headed for a major crash? -- I think it's an excellent introduction to a subject that a lot of investors are uncertain. Part two will follow this weekend...
Day 9
Results upon NY close of trading -- March 22, 2011:
- Gold closed at $1,428.80 per oz, up $1.70 and 0.12% from yesterday. Silver closed at $36.38 per oz, up $0.28 and 0.78% from yesterday.
- VFINX closed at $119.63 per share, down $0.41 and -0.3% from yesterday.
Investment #1, Precious Metals:
- Percent return for the day: 0.45%
- Profit for the day: $427.33
- Total percent return: -4.2%
- Total profit: $-4,175.62
Investment #2, Vanguard 500 Index:
- Percent return for the day: -0.3%
- Profit for the day: $-341.94
- Total percent return: -0.2%
- Total profit: $-183.48
Advantage: Vanguard 500 Index, by $4,025.26
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