The following is a guest post by BullionVault.com.

Among investors and traders, one of the most interesting products in which to consider placing your money is gold. Gold operates, to some extent, separately from other investment markets, and is often considered apart from overall investment and value trends. However, the decision of whether or not to invest in gold is one that depends on a number of factors that you may not be used to considering with other investments. Invest in gold is definitely an idea to consider, however, if you do the proper research and find the market to be agreeable with regard to your specific situation. So, if you are new to this sort of investment, here are some of the most important factors to keep in mind as you begin considering.

• To begin with, always keep in mind that gold is a backing to monetary value all over the world. Essentially, gold equals money to the exact extent dictated by each individual economy. However, on a global scale, gold theoretically equals out to the same value everywhere (with regard, of course, to monetary conversions across different currencies). This means that the total global economy may dictate the value of the gold you invest in, while sways in an individual economy will have less impact.

• Also keep in mind that gold has an inherent edge over many other investments merely because of the psychological impact it has on people. Gold has very little practical use in the world, but is instead regarded as an article of wealth and an object in which we essentially store value. However, more or less because we have decided it holds a certain value over other metals and products, and because this value tends to be relatively stable, gold tends to be a reliable investment even in times of turbulent economies.

• Do not make the mistake of considering gold as currency, merely because gold does hold monetary value. While there have been periods of history during which all currency was backed exactly by stores of gold, gold itself can still not be considered as currency, except on a government and banking level. Thus, when you consider whether or not you would like to invest in gold, pay more attention to gold as a store of value, and as it relates to world economies, rather than as an everyday instrument of monetary value. This can help you to have the right mindset as you go about considering gold investments.

Stock markets in many parts of the world closed higher on semi-positive news from the US labour market yesterday. However, the rise in stock prices over the past few days does not signal the beginning of a recovery at all. I have no doubt that stocks will plummet again in the short run. The downgrades of Italy (Moody’s, Fitch) and Spain (Fitch), the dismal situation of several European banks (most prominently, Société Générale and Dexia) as well as the ongoing foot-dragging of the ECB and European politicians all add up to what I consider a pivotal moment in the short history of the euro zone. As Robert J. Shapiro, an adviser to the IMF, and Gerhard Bläske of the German financial newspaper Börsen-Zeitung (“Flächenbrand verhindern”, 06/10/2011) recently put it, the euro zone is at the risk of finally breaking apart, if no solution will be found in the nearest future. The AAA rating of France is already being reviewed by many, and it is not impossible that Germany’s rating will come under fire, too, when ever more money will be spent on bailing out European banks and sovereigns.

How did we get here? In June, I wrote in the comments to an article that Greece should be allowed to default on its debt in an orderly way or otherwise the can, which politicians and central bankers had already been kicking down the road for much too long at that time, would get heavier by the day. Well, it certainly is heavier now. I understand that the ECB wants to buy time for the government officials to find a way out of their countries’ miserable situations by purchasing ever more sovereign bonds. But that’s all it is: Buying time. It has been clear from the beginning of the debt crisis that simply pumping money into the markets would not be a solution to the problem. Unfortunately, not much has happened since then. Instead, we had to learn that the stress tests conducted to test the soundness of Europe’s banks failed: Dexia performed very well on the test, but in reality it will have to be bailed out now. As a result, France and Belgium will have to provide financial guarantees for tens of billions of euros, which comes with a risk that rating agencies will be taking into account. We will probably know more after the weekend. I am afraid, however, that too much time has gone by and that decisions will have to be made very quickly now, not leaving enough time for a thorough analysis of both the old and new problems Europe is having.

Stock markets are down worldwide today after yesterday’s Federal Open Market Committee (FOMC) June meeting and the release of its economic projections (PDF). The Federal Reserve projects unemployment in the U.S. to be high through the year 2013, when it should be 7 to 7.5 per cent, according to the Fed’s latest estimates (this is up from last month’s projections of 6.8 to 7.2 per cent). The wide range of projections even suggests the unemployment rate to be between 6.5 and 8.3 per cent (see image from the FOMC report below).

I think it’s unsettling that unemployment is likely to remain that high until at least seven years after the start of the recession! Investors will be thinking the same, as suggested by international stock markets today. It certainly didn’t help that Federal Reserve Chairman Ben Bernanke didn’t hint at potential new steps to boost economic growth. Apparently, Mr Bernanke believes the current slowdown of economic growth to be temporary. Therefore, the central bank, which is ending its $600bn bond-buying program at this inauspicious time, will remain on hold for at least two more months before deciding about further interventions. Interestingly, the Dow Jones index temporarily jumped up yesterday right after a tweet by PIMCO’s Bill Gross saying that August would likely bring first hints at QE3. However, as soon as the FOMC published its downgraded economic outlook for the US, markets turned down again.

Today’s losses in Europe could also be due to profit taking after mostly good stock market performances on Tuesday. Charts below the fold. Continue reading ‘Stock Markets Down on Fed Projections’