Gold Investors Signal Low Inflation And No Economic Crisis

Various Euro bills.

Various Euro bills. (Photo credit: Wikipedia)

Traditionally, the precious metal has rallied during times when the future of the euro looks threatened, as it does today.

Colin Cieszynski, analyst with CMC Markets Canada, says investors should read five key things in gold’s current weakness.

1) Despite the European debt crisis and the effect it may have on the global economy, investors are not expecting another financial meltdown.

2) The slowing global economy, along with falling commodity prices, is likely to put a cap on inflation for some time.

3) Greece may have to go back to the polls next month if politicians can’t establish a coalition government. But eventually the country will end up with a functioning government.

4) Even if Greece and a few other countries have to leave the euro zone, their departure would be manageable. The unified currency is bigger than any one member.

5) The European public has sent a clear signal that ignoring problems or clinging to failed policies like austerity will no longer be tolerated. The public is demanding real, balanced, and sustainable solutions to the crisis.

“What gold appears to be telling us is that while we may be going through a period of turmoil in the short term, this could force politicians to make the tough decisions that could strengthen the global economy and financial system over the longer term,” Mr. Cieszynski wrote in his morning note.

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