The jury is in. Larry Edelson’s bearish forecast is just plain wrong! I hope you did NOT take his advice and sell out your positions. Oh sure, there was a correction, or more accurately, a Cartel-led smack-down, but strong physical buying out of China and India provided a “floor” for gold and silver to base off of.
Gold held firm just above $1,620 and silver rebounded from a low just below $31 (closing prices) although it did briefly venture into the high $20s mid-day on October 20th. Larry was of the opinion that gold would test the low $1,500s or even the $1,400s, and silver was destined to fall to the low $20s. I can’t promise you that this won’t yet happen, but I wouldn’t bet on it.
Here are my reasons why I believe gold will continue to rise from this point forward.
This is the time of year when the demand for gold is the strongest from India (the largest gold buyer on the planet). Year in, year out, gold rises from October into the following spring.
China has a voracious appetite for gold. Coupled with the demand coming from India, it will not be feasible for the Cartel to hold down the price via paper contracts.
Europe is on the brink of a banking crisis. The PIGGS require trillions of dollars to survive. More money creation is in order. Do you see inflation here – currency debasement (Euro).
The US economy is not recovering. Discontent is spilling over into the streets. It will be followed by anger, UNLESS more money is thrown at the masses. Being an election year, this WILL happen. Do you see inflation here – currency debasement (Dollar).
Japan is once again printing yen (to weaken it). More currency debasement (yen).
The best environment for the RISE in gold is when interest rates are LOWER than inflation. We have that now. It is when the Fed “monetizes” government debt by creating money out of thin air to buy Treasuries. That was QE1 and QE2 and it will continue shortly with QE3. It won’t end there either since the minute the Fed backs off with their bond purchases, interest rates will RISE. The rise will be very bad for real estate, stocks and the economy. What are the odds that the Fed will allow this to happen in an election year? Slim to none, and Slim left town.
In other words, the only tool that the Fed has to slow the rise in gold is to allow interest rates to RISE above the rate of inflation. Unfortunately, that option is not practical for them, so there is no practical way to slow the UPTREND in the price of gold. They can orchestrate a managed retreat, which is exactly what they have been doing for a decade, but they cannot derail the bull market. The decade-long bull market is alive and well. Even with two MAJOR assaults on gold and silver this year, gold is still UP 31% in the last 12-months and silver is still UP a robust 47%. The Cartel wins an occasional battle, but they are definitely losing the war.
The following two Gold Price Oscillator charts, courtesy of Nick Laird, show clearly that gold is now breaking OUT to the UPSIDE. I presented them earlier in the week, but they deserve a second look.
Here’s a past example to work out what follows. Each time it’s broken upwards gold has surged 20-25%. I can only presume that we’re on the way to new highs.
It is key to remember that when you see the price of gold and silver rise, what is actually happening is that the dollar (and euro and yen) is falling. Gold is the thermometer of the economy. Gold is the canary in the mineshaft. The stock market has gone no-where for a decade. Gold has gone from $252 to it’s recent high of over $1,900. It will re-test it again, for the third time, by years end or shortly thereafter. Three is the lucky number. Once $1,900 is breached, $2,000 will follow shortly thereafter. That is when the public will jump back into the gold market. They will pay 20% MORE then to buy gold than they have to. Gold (and especially silver) is ON SALE NOW. Don’t believe me? O.K. See what you think when gold is $2,000 and silver is over $40 in a few months. But please, please don’t tell our brokers “I missed the opportunity, it’s too expensive now.” That is exactly what usually happens.
Check out Andy Hoffman’s rant in today’s daily. He is a non-stop writing machine. He should change his name to RANDY Hoffman (Rant + Andy = Randy). His message is simple – you don’t want to be in dollars (or any currency), or in stocks (even mining shares). Gold and silver are your best – only choices. If you think that Andy is “biased,” think again. For the past five years, his rants, urging you to buy physical gold and silver, were penned while he was outside of the industry. He is the only writer I am aware of who pounded on the table, urging everyone who would listen to buy precious metals – who didn’t work in the industry or write a “paid for” newsletter. He did it out of concern for you, with no compensation. He’s a good guy! That’s why I hired him.
I will publish the Monday newsletter but then will turn the ball over to Andy Hoffman. Andy will write the newsletter next week, while we move into our condo in Aventura. He will use the regular format, so you shouldn’t notice any real change – other than for a few days I will not be contributing. The daily will be in good hands.
Below, a picture of my daughter, Betsy “The Killer,” and her husband David. Don’t fret – the ducks are safe! Mind you, she has NEVER fired a gun before. I can hardly wait to see the “black and blue” welts on her shoulder. Pretty funny, considering that in spite of my constant urgings, she refuses to allow a gun in her home.
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