Lear Capital: Bank Deposits Go Bust, Gold Gets Boost

2010_01_05_17_53_260001There’s a hundred reasons gold prices could go up one day and down the next.  With so much taper tampering, nuclear noodling and health care hassles, it’s no wonder the markets jitter.  But, I bet, never in a million years did you expect to see the day when banks would have to charge you to hold your money.

That’s the news that flooded the airwaves this morning.  Gone may be the days when you can expect to earn interest on your bank deposits.  Currently, the Fed holds about $2.4 trillion of bank reserves.  Reserves they normally pay interest on to the banks who claim title to those reserves.  Today, we learned the Fed is threatening to cut that rate by as much as a quarter point.  And, at that rate, banks lose money – or so it is said.

You know what that means?  Say hello to an epidemic of back pain due to an increase in lumpy mattresses.  Who in their right mind is going to want to pay the bank to hold their cash when all it means is a guaranteed devaluation of every dollar held.  Mattresses everywhere will fill with cash and hard money.  Hard money like gold and silver.

In response, gold and silver prices erased early day losses and began to climb in after market trading.  Good news travels fast.  Bad news travels faster.  For the first time in history, gold and silver prices, often criticized for not producing cash flow, may be able to stand still and outperform returns on bank deposits.

Is this why gold and silver prices got a boost today?  Sleep on that one!

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