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February 9, 2010 – Gold investment has been down recently as the US dollar has enjoyed a level of success against euro-based currencies. This has been the result of severe financial problems in a group of countries now referred to as “PIGS”, an acronym for Portugal, Italy, Greece and Spain. While these countries struggle with burdensome national debt issues and monetary devaluation, the US dollar has profited. The irony is that the US has its own “pigs”, seven states that threaten to undermine the stability of the economy and spur new gold investment.

The list of struggling states in the US is California, Florida, Illinois, Ohio, Michigan, North Carolina and New Jersey; each of these states has a population of over 8 million, meaning that the group represents nearly 35% of all people living in the US. This group has other common characteristics, including underemployment above 15% (as measured by the U-6 measurement), over $1 billion in loans to pay unemployment claims and loss of revenue due to key business sectors such as banking, automotive and housing. In short, these “pigs” are losing billions of dollars and have shrinking revenues that are becoming unable to handle the load.

The danger to the United States is not unlike what the European Union is facing with its struggling countries; the states that are becoming a financial drain on the country. Now facing a national debt expected to climb to $15 trillion this year and unrelenting unemployment, the problems with these and other states in the US are weakening the dollar. As the dollar has profited from the weakness in European currencies, gold investment is likely to profit from the dollar’s weakness.

There is growing concern for the potential of inflation in the US as the economic hardship erodes the value of the dollar. Reduced dollar values make things more expensive, putting extra pressure on the economy; gold has traditionally been an investment hedge in times when inflation rises. With metal prices correcting after last year’s impressive run, the timing is right for a renewed rally in gold investment.

With a combined population of about 70 million, these four European countries known as the “PIGS” are placing a burden on a Europe that it is struggling to survive. With a population of about 105 million, the seven “pigs” of the US economy are doing the same. As analysts return their attention to the US economy, the financial problems here are likely to drive down the value of the dollar down and drive up gold investment. 

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Stewart Lawson

Senior Staff Writer - Gold-Investment.info