Eurozone breakup: how would this affect precious metals?Submitted by Charleston Voice on Fri, 05/04/2012 - 20:38
As funding pressures and economic distress increase in Spain, talk of a potential breakup of the eurozone has returned. There has been debate as to whether this would be a deflationary or inflationary event, and how it would affect the precious metals markets.
In the event of a breakup, investors need to be prepared for a period of extreme volatility, characterised by chaotic trading conditions in all markets. Similar to 2008 a financial shock such as the failure of the eurozone would likely be met by trading that is more characteristic of panic/liquidation decision-making than fundamentally sound trading. Remember that after the collapse of Lehman Brothers gold traded almost as low as $700 after previously being above $1,000 all while an historic expansion of the Federal Reserve's balance sheet was getting underway. So it will be important to distinguish between short term trading noise and longer-term fundamentals.
With increasing debt burdens and little evidence of a plan to effectively address them, a look around the globe shows few safe havens remaining. Where would capital flee in the event of a eurozone breakup?... Read more>>Eurozone breakup: how would this affect precious metals?