SGM Metals: IMF "Growing Shortage of Safe Assets Bodes VERY WELL for Gold"

April 25, 2012 - PRLog -- zerohedge.com reports: [ The number two official at the US Fed, Yellen, said overnight that due to high unemployment facing the economy, the Fed has left the door open to further Fed action including QE. Further QE and the continuation of ultra loose monetary policies will be positive for gold.

IMF: Gold Is Scarce “Safe Asset” And “Rising Demand for Safe Assets” Further confirmation of gold’s continuing but gradual renaissance as a safe haven asset was given by the IMF yesterday who warned that a “growing shortage of safe assets” poses a threat to “global financial stability.”  The IMF identified $74.4 trillion of potentially safe assets today, including gold, investment grade government and corporate debt, and covered bonds.

Sovereign debt crises are reducing the number of governments that investors trust to issue "risk-free" bonds just as new financial regulations are increasing demand for safe securities from banks. Importantly, the IMF’s latest Global Financial Stability Report’s introduction finds that "In the future there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets.”

“Both the lack of political will to reshape fiscal policies at times of rising concern over debt sustainability and an overly rapid reduction of fiscal deficits limit governments’ capacity to produce assets with low credit risk.”

The IMF has warned regarding illiquidity in “safe haven” markets. Gold remains one of the most liquid markets in the world and the illiquidity in bond markets would see increased safe haven demand for gold.

The IMF is warning regarding deteriorating public finances. As many governments see themselves being downgraded - safe haven bonds may become less safe. This bodes well for gold in the coming years and should see gold again be seen as a leading if not the ultimate safe haven asset.]

The IMF is finally saying something that makes sense, now that governments around the world have declined to cut back on spending the stability of their ‘risk free bonds’ is becoming less than comforting and investors are trending towards gold as a safer asset. You see investors around the world, while facing a most threatening financial crisis in their lifetimes, opted to assume the money masters would fix the markets by manipulating the fiat money system as they always have before. . . . . but this time if different. The assumption that the fiat system could be manipulated into normalcy led investments to follow the standard approach to asset allocation with the typical stock and bonds strategies. Now the pendulum is swinging the other direction and investors are starting to reevaluate the FED’s ability to bring actual remedy to the crisis at hand as it continues to get worse and multiple nations now are teetering on the brink of default.

The realization that this crisis is much different than any period of economic recession in world history is long over due and bringing with it the concern of what the world might actually look like on the other side. While it’s a promising sign that large investors are starting to look at this event differently, it doesn’t mean that the average person didn’t figure it out over the past couple years on their own. The big boys had no reason to assume the crisis would create any real, lasting damage. Instead they realized they would be handed trillions of bailout dollars at the expense of the citizens which would create a huge period of economic consolidation to their benefit, so it would be nothing different than the last ‘downturn in the business cycle’ for the banks & Wall Street insiders. They were handed trillions of uncollected tax dollars and it did permit then to consolidate the economy by buying up competitors for pennies on the dollar in their industries with our tax dollars. The free money was used to create a ‘monopoly of convenience’ which then ended up giving them the ability dictate higher prices at a point where consumers are already struggling to make ends meet.

These facts didn’t get overlooked by the end consumer as they were feeling the real pain in the economy first hand. This has ironically encouraged the average investor to connect the dots that they are not going to see any real upward mobility in their financial situation in life and this compelled them to look at alternative strategies. This has created an unbelievable wave of demand for precious metals around the world both by individuals as well as other central banks and nations that are realizing the FED isn’t going to let up anytime soon on their fiat money printing campaigns. The western banks didn’t assume the other players in the global financial system would begin to make a back up plan in the event this time was different. As this trend towards precious metals radically pushed up the metals prices last year it became very clear that the world wasn’t completely buying the FEDs ability to make everything go back to normal and the western banks got really nervous. The banks have a vested interest in keeping the precious metals down so that the fiat US dollar seems viable, but that picture is getting very fuzzy as the days pass.

What will end up happening is that once the Wall Street boys start to become tempted to grab onto some gold & silver just in case, the realization that the tons and tons of precious metals have been quietly gobbled up by the individual investors will cause the big boys purchases to create huge fluctuations in the pricing mechanism and its will be off to the races. Establish your ‘Plan B’ in physical gold & silver bullion now and know in your heart that once the world puts enough distance between themselves and the US dollar the global shift will go into high gear. This will send gold & silver prices beyond anything the world could ever imagine. With 7 billion people on the planet and more fiat currency than ever before the price of a limited volume of precious metals will go to the moon as investors are willing to give away any volume of monopoly money to hold real money. Take comfort in knowing you have been wise enough to prepare for the coming panic into precious metals and stay the course as it will create dynastic wealth as the greatest wealth transfer in history unravels.