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Gold & Stock Markets Rally, But Troubles Continue in Europe

With gold surging $20, and stock markets rallying around the world, today King World News interviewed 25 year veteran Caesar Bryan. Gabelli & Company has over $31 billion under management and Caesar Bryan has managed the gold fund since its inception in 1994. Here is what Ceasar had to say regarding what is happening around the globe: “There are still huge challenges because there is simply too much debt, and of course the medicine that’s being prescribed is to cut government spending in a very weak economic environment. The Spanish, just yesterday, an approximately $60 billion euro further budget cut over the next two years, from 2012 through 2014.”

Caesar Bryan continues:

“This was a significant announcement coming out of Spain. They also announced VAT increases, and sharply cut social security type payments. The VAT increase is over 1% of GDP. It’s a rise in the VAT tax from 18% to 21%. Spain is already in a depression and this just adds to the downward bias. This takes additional growth away, it’s counter-cyclical.

All of this followed pronouncements by the Spanish government that there was no need for them to take any further measures following the bank bailout....

Continue reading the Caesar Bryan interview below...

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“They had stated they received the money and it was not conditional. Well, obviously that’s not true based on this development. So the leaders still continue to mislead.

Europe still faces a number of challenges because yields in many countries are simply too high. Today, Italy’s Ten-Year yield is 6%, and Spain’s is 6.5%. In contrast to that, you have Germany’s Ten-Year yield at 1.24%.

So we have this scenario where challenged countries are being severely punished. They are sporting yields where the math just doesn’t add up. Their debt will continue to balloon. Yet, on the other side of the perceived safe countries, they have ridiculously low 10-Year yields.

Since the ECB reduced the rate of interest on deposits held at the ECB to zero, we’ve seen money flow out of the ECB. We also seen the short-term yields go negative in key Northern countries. Two-Year government bond yields in Switzerland, Denmark, Austria, Germany and the Netherlands are currently negative.

Now, should the Fed cease to pay 25 basis points on excess reserves held at the Fed, would that mean that government yields in this country would go negative? I think that’s quite possible. Right now the 2-Year trades at 25 basis points.

What does all of this mean? In terms of a nominal return, you are getting back less money then you are lending. But on a real basis because there is so much inflation, it’s a very negative return on investor’s money. This is extremely supportive for the gold market.

We also have the global economy sagging, and the Fed has already stated they will be monitoring that situation very closely, and that they will be ready to act to support. The Fed will have extra incentive to act if the dollar continues to strengthen.

So we have the authorities which are looking for an excuse to print more money as we continue this race to the bottom in the global currency market. When the gold market fully grasps this, then movements in the marketplace won’t be related to whether the US dollar is up or down or whether equity markets are up or down.

I would also add that the Japanese need to get the yen down, so I would expect more central bank activity out of Japan. The yen has been the strongest currency since the financial crisis. The bottom line here is that all of this plays to gold, which can’t be printed and is nobody else’s liability.”

Caesar had this to say regarding the mining shares: “The mining shares are giving you an opportunity right here, right now. The mining shares hit their low relative to gold in the middle of May, and then had a very nice rally. But they have since given up that rally.

So the mining shares are back to the low where they were in the middle of May on a relative basis. I strongly believe this presents investors with a great opportunity.”

The interviews with Egon von Greyerz, Bill Fleckenstein and Jean-Marie Eveillard (oversees $50 billion) are available now. Also, be sure to listen to this week’s line-up of other KWN interviews which include Michael Pento, Gerald Celente, MEP Nigel Farage, Dr. Stephen Leeb, Rick Rule and Eric Sprott by CLICKING HERE.

Eric King

KingWorldNews.com

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July 13, 2012

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