Why did gold rise on Monday? Although the media made no mention of it, the Bank of England added hundreds of millions to the money supply on Sunday, their version of QE3. The funds responded by buying gold.
I wish to re-state my view that gold and silver are in long-term bull markets that have not ended. My horizon is at least three to five more years. Gold will be a slam-dunk winner, soaring to at least $4,000 to $5,000 an ounce. I can’t guarantee it, but that is my view. Silver is much more “iffy”, and certainly more volatile. From its current ratio of 54:1 to gold, it may outperform gold, on a percentage basis, but then again, since a significant portion of its demand is industrial and the global economy could slow dramatically, silver may not keep up with gold. Diversify! Do not put all your eggs in one basket. It is better to give up some potential gain in order to avoid a large loss. I would sleep well at night with a portfolio based on physical gold, silver and platinum – and some well-researched mining shares. Keep some cash on the sidelines. The last thing you want to happen is to have to sell some of your metals portfolio in times like these, where you are dealing with a manufactured “correction.” Prices still could go lower from here, but probably not much lower, if at all.
Larry Edelson is warning of a second leg down in gold and silver. His track record is inconclusive, although his last call was correct. My son Andy, just back from the Casey Conference in Phoenix, told me that all of the speakers at the conference were very bullish on the metals now. So are most of my sources. Still, don’t be surprised if gold pulls back another $100. Silver could drop another $7 or $8, but I deem these further corrections to be unlikely.
The wild card is what happens in Europe and in Greece. If the Euro takes a huge hit then the dollar will rise and that will provide a head wind for gold and silver, albeit only a temporary one. In my view, the only practical solution is to inflate the dollar and the euro and continue to kick the ball down the road to buy more time. Remember, an election is just a year away and you know that the politicians (and the Fed) will do whatever they can to keep the incumbents in power. Therefore, I expect QE3 and I expect the PPT to work extra long hours to keep the stock market from unraveling. Good luck fellas. That will be no easy task. Inflation fears and concern over a disintegration of the EU will keep gold and to a lesser extent, silver, in the spotlight. Safety will be the number one concern, not return on investment.