Junior Mining Stocks Could Soon Outstrip the Senior Ones
October 10, 2012 by Gold Editor
SOURCE:[Market Oracle] - It would behoove those who still cling to a misguided faith in fiat currencies to pay close attention to what is happening in Iran. The rial swooned in a free fall as much as 18% on Monday to a record low against the US dollar. The collapse was so steep that Iranian currency websites blanked out the rate. The currency has reportedly lost 80% of its value since the end of 2011. It is literally getting to a point that it will not be worth the paper on which it is printed.
The economic sanctions imposed on Iran over its disputed nuclear program are hitting Iran where it hurts. Inflation is raging at an annual rate of 24 per cent, Iran has been all but frozen out of the global banking system, and its oil exports have been slashed. Britain, France and Germany are pushing for EU sanctions on Iran to be tightened further later this month, to close some of the larger loopholes. Iran's weak currency makes imports to the country more expensive and although a weak currency can theoretically make exports more attractive, Iran is in a bind since most countries don't want to trade with it.
And in a classic scenario, the Iranian government has tried to step in to make things better and bring the currency under control but has only made them worse. Last week it launched an exchange center aimed at stabilizing the rates, but the rial's fall has since increased. Previous attempts also include a sharp rise in interest rates in February and an order for an imposed exchange rate to be used both in banks and on the open market. At the time, the police were sent to change bureaus to implement the order but change bureau owners simply shut down and refused to comply.
Many Iranians have lost faith in the rial and are contributing to its instability by rushing to convert their assets and properties to foreign currency and gold. Turkish gold sales to Iran have soared as Iranians turn to the precious metal to protect savings.
Wait a sec. Isn't it for times like these, when the you-know-what hits the fan, that one needs to have physical gold put aside?
Gold has proven itself to be good money time and time again throughout history. It possesses all the properties to make it so: divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value.
Investor and newsletter publisher Dennis Gartman told CNBC Tuesday that "Gold is just another currency. It is doing well in other currency terms... I am not a gold bug. I don't think the world is coming to an end, but I think everyone needs to own some gold."