Gold getting boost from dangerous currency crises in Argentina, Turkey, elsewhere - Wealth Managers

"Amid the recent panic, it's one of the few things that's going up"

The Federal Reserve is convening Tuesday and Wednesday for its first meeting of the year and the last one ever led byBen Bernanke before Janet Yellen takes over as chair. The question on everyone's minds is: Will the central bank continue tapering its massive stimulus program?

What's different since the Fed announced the launch of its first round of stimulus tapering? That horrible December jobs report, for one, as well as an emerging-market currency crisisand a suddenly teetering U.S. stock market.

The Fed "has created a truly global problem," Michael Snyderof the Economic Collapse blog wrote. "A big chunk of the trillions of dollars that it pumped into the financial system over the past several years has flowed into emerging markets. But now that the Fed has decided to begin 'the taper,' investors see it as a sign to pull the 'hot money' out of emerging markets as rapidly as possible. This is causing currencies to collapse and interest rates to soar all over the planet. Argentina, Turkey, South Africa, Ukraine, Chile, Indonesia, Venezuela, India, Brazil, Taiwan and Malaysia are just some of the emerging markets that have been hit hard so far. In fact, last week emerging market currencies experienced the biggest decline that we have seen since the financial crisis of 2008. And all of this chaos in emerging markets is seriously spooking Wall Street as well. ... If the Federal Reserve opts to taper even more in the coming days, this currency crisis could rapidly turn into a complete and total currency collapse."
USA Today also weighed in on the turbulence of the past few days: "Indeed, the great bull market on Wall Street has suddenly run into a stumbling block that few investment strategists were even talking about at the start of the year: swooning currencies and capital flight out of vulnerable emerging markets like Turkey and Argentina. The financial turbulence, which is being greatly exacerbated by a slowdown in growth-engine China, has raised fears of a potential crisis that could inflict damage on these developing countries' economies and perhaps infect other nations as well. That lethal combination could ultimately crimp earnings of U.S. multinationals. It could also prompt investors to dump risky assets, a response that already seems to be underway."

Indeed, the U.S. stock market "is among the most overvalued in the world," John Stepek of MoneyWeek wrote. "That makes it more vulnerable than most developed markets to a knock-on impact from emerging markets. Particularly if economic data disappoints for any reason. ... This is also a useful illustration of why you should hold gold in your portfolio as insurance. Amid the recent panic, it's one of the few things that's going up."

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