2013: Another Auld Lang Syne?

Written by Scott Carter

Posted on 28 Dec 2012

We'll take "a Cup o Kindness" and a stash of Gold!

At this time last year, we faced high unemployment, mounting national debt, a devalued US dollar and an uncertain global recovery. As we look to 2013, little has changed. There remains no easy solution to any of our economic woes and proactive fiscal strategies and tactics remain hard to come by. Another Auld Lang Syne? Perhaps!

It's no secret that Washington is dysfunctional! No grand fiscal bargain has been struck and policymakers continue to literally buy time. How much does "time" cost us in borrowing and interest? About $2.5 Million per minute.

Concern over our amassed debt persists as broad-based Quantitative Easing has not produced any sustained economic growth in the US, the EU, Japan, or the UK. And growth has actually slowed in China as global demand for their imports have slipped. Our universal debt problems now loom so large that only a global diktat of fiscal rescue or a multinational capital infusion could shore up the world's collapsing currencies.

As fewer and fewer of these currencies can now be considered non-fiat, the attractiveness of gold as a reserve asset remains strong. Gold reached record highs in 2012 in a host of world currencies including ... the Euro, Swiss francs, Brazilian real, Indian rupee, the South African rand. With investor faith in fiat monies deeply shaken, we expect the world's central banks to continue to buy gold to shore up value.

So the same soft monetary policies that sent gold prices higher over the past few years ... have not been changed or amended. We continue to kick the can, drag our feet, and put off fiscal prudence until tomorrow. Buying time has proven to be costly and made our problems far worse. As faith in policy makers and politicians wanes, investors will continue to seek safe haven and diversify away from soft currencies to further monetize precious metals and spread risk through the physical backing of gold and silver.

"Should auld acquaintance be forgot, And never brought to mind?"

That's never a good plan. Gold is perhaps our "auldest acquaintance" and revisiting its recent history reveals its most valuable lessons. For as long as men continue to live beyond their means and the world continues to have financial calamities, gold will provide a safe haven and store of value for the educated investor.