Our nation's Commerce Department stepped up to the mike this morning to concede that yet another economic indicator is negative for a 13th consecutive month, and this announcement prompted some investors to buy gold and silver. Business inventories are down yet again, and US retail sales were down 1.5% in September as well. Many economists feel that consumer spending well remain weak until Americans see evidence that an actual recovery, and not just the specter of one, is underway. Paul Dales, an economist with Capital Economics, believes that household spending will likely remain constrained by rising unemployment rates, declining personal income levels, and the credit crunch. Consumer spending accounts for 70% of the total economic activity recorded by the United States, so it is no surprise that so many people opted to buy gold and silver when they discovered these latest figures.
Included in the 1.5% retail sales decline was a 10.4% loss by the auto industry, which took a blow due to the end of the government's "Cash For Clunkers" automobile replacement program. Many economists fear that the short-term benefits of the program will be outweighed by the long-term trauma that it could cause our fledgling economy. If US automakers are forced to suffer through consecutive months of 10% decreases in sales, the automotive industry could virtually collapse, which would have a devastating effect on our economy. Some investors are looking for a way to effectively protect, and even grow their wealth in the midst of today's cagey economy.
Unlike CSX, Johnson & Johnson, and many other companies who have recorded losses in 2009 due to decreased sales, household investors have the option of jumping ship at any time. If shipping demand is down, CSX cannot switch to selling soda. If health care products are not selling, J&J cannot make money by marketing personal pizzas. When certain markets underperform, household investors have the advantage of cutting their losses and shifting funds elsewhere. Many economists feel that investors who buy gold and silver could realistically see gains of 12-18% by the end of 2010, and the added benefits of privacy and liquidity persuade many investors to diversify.
Steven Martin
Senior Gold Specialist - Buy-Gold.org
