Greece downgraded: Good time to invest in gold

Investment

oi-Monika Nihalani

By Monika Nihalani

Published: Wednesday, June 22, 2011, 12:38 [IST]

Gold is considered to be a 'safe haven' a kind of safe investment at times of crisis or economic imbalance. Current upheaval around the globe will force upward pressure on gold prices. So its a good time to snap a piece of your assets and invest in gold at this point of time.

Disturbance in global economies viewing Greek debt crisis, weak credit status of U.S economy, weakness in dollar etc. all these factors indicate strongly to go long for commodities like gold and silver.

(Also read: How to invest in gold)

Greece downgraded:
Greece, which was already granted a 110 billion euro bailout last May, will need billions more to get out from underneath its current messy financial situation over the coming years.

Europe's top financial officials have failed to reach an agreement on a new aid package for Greece and the situation looks more critical than ever. The nation's debt will reach some 160 percent of its GDP by the end of this year. Unemployment is above 16 percent and its economy is expected to fall 3.7 percent this year.

On Monday, Standard & Poor's Ratings Services downgraded Greece's credit rating to CCC, saying that there is “a significantly higher likelihood of one or more defaults," as defined by its criteria on full and timely payment.

Fall in Euro:
The euro has fallen on international markets as the European sovereign debt crisis is aggravating and appears to be reaching a dangerous outcome. European stock markets are also weaker due to serious divisions on Greece. Moody's has now set three large French banks on negative review based on their exposure to Greece. The problem looks increasingly uncontrollable and it may take years to recover.

U.S. downfall and weak dollar:
U.S. has $14.3 Trillion National Debt and $61.6 Trillion in Unfunded Liabilities, that shows finances of the U.S. are not much better than that of bankrupt Greece and is inching closer towards default every day.

Jim Rogers, Chairman, Rogers Holdings in his latest interview with ET presented a gloomy picture of U.S. Commodities may outperform equities in near term, according to him.

Fitch also moved to downgrade America's credit status and weakness in dollar.

Financial markets and currency markets could see further sharp falls in the value of the dollar because of uncertainty of U.S. recovery.

The deepening debt crisis in the European region and potentially soon in the U.S. is a fundamental reason that the majority of retail investors and savers should have gold in their portfolio.

Gold is higher against the euro, pound and Swiss franc and lower against the U.S. dollar, the Yen, Kiwi and Aussie dollar. It has very strong demand coming from China and India where the World Gold Council said that there is a “tidal wave" of “gold demand coming".

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