Gold & Silver; Flight to QE
The current situation is looking rather grim and almost every man for himself as central banks around the world is bracing to make changes in interest rate. Is it the fear of global deflation that summoned such drastic changes uncoordinatedly? Many investors deem the global economy is “steady as she goes”, it was a surprise move amid the stable outlook that was portrayed many times by high esteemed analyst and world economic organization (even the central banks) sounded more or less neutrally positive. Now it all seems like a big hoax, made to sell an ideology that was far from the ideal scenario. Not only has recent actions showed the lack of faith in the global economy, it paint that not one central banks can control or abate what is coming around the corner. Certainly there is an aspect of underestimating the overall situation which encourages the drastic move. One then wonder if 2015 has already started to bring false hopes and despite the safety light is off, one is better to have it on just in case more violent turbulence as the flight to stability (rather than prosperity) set to cause tremor.
With the Euro trading around 1.16 around the dollar, a statement by Mr Draghi to make a large scale QE may already been priced in. We see the market rebound should the amount of QE made is less than 500 billion as anticipated. Flight of safety has already started as hot money flowed away from risky assets, stepping aside until the dust settles is the best solution. The German DAX has made its first move as the place to bet that extra liquidity will boost only the German economy. Ironically, this is one of the best and easiest investments that one can make. Despite that, we are not encouraging or representing the norm. Our view is that smart investors are continuously diversifying their wealth in the form of precious metal given its negative correlation towards equity and other risky assets.
Stepping aside from all the noises, a safe investment in 2015 should be the main priority among investors as the flight to stability is far from over.
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20 Jan 2015