All Signs Point to BUY GOLD

All Signs Point to BUY GOLD
By Greg McCoach

DENVER, CO--Continued turmoil in the mortgage finance system led to an 8.3% drop in the sales of new single-family homes for the month of August. Meanwhile, builders in the US began work on the fewest homes in twelve years and new building permits dropped 5.9% to their lowest levels since 1995.

Yuck!

Robert Toll, chairman and CEO of Toll Brothers Inc., summed up the current housing market and credit crunch nicely two weeks ago while speaking at the Credit Suisse Homebuilder Conference . . .

 

Deep doodoo indeed.

Home builders are now launching new promotional price reductions as well as other incentives to attract homebuyers and move standing inventory off their books.

It's an act of desperation that I doubt will have much positive effect for them.

Potential buyers are being constantly inundated with negative media commentary on the housing market, which is further exacerbating residential housing woes.

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There are about twice the numbers of homes on the market for sale compared to a year ago. Buyers have more choices, leading to higher competition among sellers and lower prices.

Furthermore, lending standards across the country are tightening. Folks who want to put no money down on a home are being subjected to more scrutiny when they apply for a mortgage loan. As a result, they are being turned down more often than they were last year.

The consequence is that houses are sitting longer on the market, and once again no one benefits. Homeowners get anxious when waiting to sell their houses and often react by lowering prices and accepting lower offers.

In an effort to help the housing market the Fed stepped in two weeks ago and cut interest rates by a half-percentage point, the first rate cut in the past four years.

It was the old band-aid on the broken leg.

And that's because for the sub-prime mortgage borrowers who are already on the brink of foreclosure, the Fed cut is of little consequence. At this point in the game, the Fed simply cannot help them. The Fed cannot help them!

Moreover, the Fed cannot fix the overall broken house market. It can only work to delay the inevitable.

The world's financial policy technicians will be hard pressed to solve the housing issue. And for now we can't get around the problem. We have to just go through it.

The piper must be paid.

Meanwhile the USD continues to erode in value.

The dollar extended its recorded-setting lows against the euro this morning. The once mighty greenback fell to $1.43 per euro, its lowest level since the 13-nation currency's debut in 1999.

The USD Index, a basket of six weighted world currencies, has also been steadily trending lower. At last look, the USD Index was at 77.86.

Further dollar weakness is probably still in the cards. And an unpleasant thought lingers in the back of everyone's minds: Recession.

Let's face it . . . Americans are spending junkies. We've borrowed trillions of dollars to remodel our homes, take vacations to Tahiti, and buy 60" plasma HDTVs and giant gas-guzzling SUVs.

There are consequences to this lifestyle. And we'll reap what we've sown.

We're living financial history here, ladies and gentlemen. And the best way to hedge yourself against personal fiscal catastrophe is by doing what I've been urging--practically begging--people to do for the past ten years: BUYING GOLD!

With the USD on the back foot and the economy on the verge of recession, precious metals will see continued support.

Gold has recently breached the $750/oz. level as the reality of economic disaster is finally beginning to sink in.

The yellow metal is now at a 28-year high after rising some 10% last month. And the fundamentals for gold have never looked stronger.

Besides the weakness in the USD and the credit crisis, September and October are typically a period when jewelers increase their holdings. Gold ETFs have also been buying aggressively in recent months and central bank selling has cooled off.

Please, do yourself and your family a favor: Hedge the coming financial economic crisis with gold.

Until next time,

Greg McCoach