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POSTED ON November 21, 2011  - POSTED IN Gold Scams Exposed

When you first venture out to purchase your gold or silver the choices will be plentiful and so will the advice. You’ll face the options like: squares or circles, shiny or dull, and government issued or good ol’ minted bullion. It can become overwhelming and even confusing deciding whether junk or .999 rounds are the best choice for you. However, one of the best things you can do before making that kind of decision is consulting with experts…and/or someone you trust.

When I first decided that I should be investing in precious metals, the motivation came from my readings on the Federal Reserve Bank and the inflation that was taking place in the US and abroad. I had always thought it was silly to keep money in a bank account when the interest I was accruing wasn’t working fast enough to combat the decline of the dollar’s purchasing power. Thus, I turned to what seemed like a trustworthy investment: precious metals (namely silver, because I didn’t have $500K to throw around). It was then I realized, I need to start educating myself. I hope this was a thought that crossed your mind as well.

POSTED ON November 3, 2011  - POSTED IN Original Analysis

By Peter Schiff

I think I know some lab mice that have received less examination than the 2012 Republican primary candidates. It seems with each passing cycle, the campaigning starts earlier, there are more debates, and the media frenzy gets more intense. Yet, with all the pyrotechnics and pageantry, it becomes difficult to figure out what these tricksters actually think when they’re behind the curtain. Since the gold price is inextricably linked to the long-term fate of the US dollar, it’s rather important for gold investors to be able to forecast how each candidate, if elected, would conduct his/her monetary policy.

Monetary policy is not nearly discussed enough in debates or television appearances – partly because too few viewers care about it, and partly because most candidates simply don’t understand the subject. The most common monetary policy platform amounts to little more than, “I’m opposed to China’s currency manipulation, and America needs a strong dollar!” (Little do they know that these two goals are right now in opposition.)

As we examine three frontrunners, it’s important to remember that their future policies can be difficult to distil, but that their past records are likely to be a more effective indicator than their present rhetoric.

Herman Cain: The Fed Chairman

Cain’s lucky he’s known as “The Guy Who Makes Pizza” instead of “The Guy Who Prints Money.”

Herman Cain was Chairman of the Federal Reserve Bank of Kansas City from ’95 – ’96, and held the positions of Deputy Chairman and Board Member during the preceding six years. This was the heyday of Alan Greenspan’s bubble economy, and there is little record of Cain dissenting. While some have remarked that Cain knew little about economics when he joined the board, he has had ample time to learn. Yet, when challenged to name his favorite Fed Chairman at this year’s debates, Cain still chose Greenspan!

Cain’s flagship “9-9-9 Tax Plan” is drawing headlines, but it contains no in-depth discussion of monetary policy, other than brief allusions to a “strong dollar.” No mention of quantitative easing or the money supply. No condemnation of artificially-low interest rates.

Even if Cain were able to reduce taxes considerably, the spending would continue. Like many Republicans, Cain talks generally about spending cuts, but does not specifically target any budget items. We can assume any actual cuts he gets through Congress would be of the “slow the growth of future spending” variety.

With continued spending and record of inflation tolerance, Cain will most likely turn to the Fed to monetize the extra debt. This means a Cain presidency is likely to be very bullish for gold – with the mitigating factor that if given free reign, Cain might at least try to move the country back on a sustainable path.

Cain Presidency:

  • Bullish for gold
  • Bearish for USD

Mitt Romney: The Closet Democrat

Consider the following quote: “My experience tells me that we were on the precipice, and we could have had a complete meltdown of our entire financial system, wiping out all the savings of the American people. So action had to be taken.”

It sounds like Tim Geithner, Ben Bernanke, or Paul Krugman. President Obama himself has said exactly the same thing countless times. Yet, this quote comes from Mitt Romney at a recent Republican debate.

Romney supported the TARP bailouts. Romney defends the Federal Reserve. Romney even implemented socialized medicine as Governor of Massachusetts. He says he would conduct monetary and fiscal policy “differently” than Obama, but when you’re car is headed over a cliff, it doesn’t much matter whether you drive on the right or left side of the road!

Just as with Cain, Romney still does not understand the terrible precedent set by the bailouts, and the devastating consequences loose monetary policy has on the US dollar and global economy. Worse yet, Romney hasn’t even offered a credible plan to reduce government involvement in the economy. Romney’s campaign slogan might as well be, “A New Face for the Status Quo.” And the status quo is a collapsing dollar and skyrocketing gold.

Romney Presidency:

  • Very bullish for gold
  • Very bearish for USD

Ron Paul: The Gold Standard

If Ron Paul were elected President, he would immediately move to cut spending drastically. This is clear based on his 35-year record of acting on his promises, and his recent campaign pledge to cut $1 trillion from his first proposed budget. He would face stiff resistance from both parties, for sure, but such a move would change the entire direction of public discourse.

Now, it’s important to remember that $1 trillion is only two-thirds of the 2011 deficit. So, even if President Paul got his entire budget approved, we still would be facing a growing debt of around $16 trillion at that point. While President Paul could order the Treasury to begin selling its toxic assets that are impeding economic recovery, he wouldn’t have direct control over the Fed – which, under Bernanke, would likely announce even more money-printing to counteract the President’s tough medicine.

But President Paul’s real silver bullet would come two years into his term when he would get the opportunity to nominate a new Fed Chairman. As someone who entered public life in response to the end of the gold standard under Nixon, Paul is certain to appoint the most hawkish Fed Chairman the country has ever seen. This would immediately reverse the misfortunes of the US dollar and could impact gold’s rise.

But remember, even in this pie-in-the-sky scenario, it will still take years for Bernanke’s devaluation damage to fully circulate around the global economy. That means gold could still appreciate well into a Paul presidency.

Ultimately, a Paul presidency could also lead toward a gold standard monetary system. In such a case, gold is likely to carry an even higher value as the premium for serving as the international reserve asset.

Paul Presidency:

  • Bullish for gold
  • Bullish for USD

Rick Perry: The Big Spender

Rick Perry is a career politician now in his 11th year as Governor of Texas. He claims to be a tax-fighter, but he has signed several tax increases as Governor. To the extent that he has held the line on taxes, he’s overseen a more than doubling of Texas state debt. And not all of this money was going to pay for schools and roads. For instance, he created the $435 million Texas Enterprise Fund to subsidize politically connected businesses.

As a candidate, Perry has adopted Ron Paul’s rhetoric being critical of the Fed’s quantitative easing programs. He’s even gone as far as accusing Bernanke of “treason.” But he doesn’t show a deep understanding of what makes the Fed’s policies so destructive, and his campaign website makes no mention of monetary policy at all.

Still, Perry at least knows which way the wind is blowing, and he does have a record of vetoing expensive legislation. Overall, it’s hard to tell what kind of President he would be – a lot like it was for the last Texas Governor that become President. In the latter case, President George W. Bush claimed to be for small government and a humble foreign policy, but went the exact opposite way once elected.

Perry might make an attempt to change Washington’s direction, but he has neither the depth nor the steadfastness to really make it happen. Thus, the current gold/dollar dynamic would be likely to continue.

Perry Presidency:

  • Bullish for gold
  • Bearish for USD

Newt Gingrich: The Benedict Arnold

In the mid-’90s, Newt Gingrich gained a reputation as a radical reformer after he led the Republicans to their first House majority in 40 years. He wrote a Contract with America, and made a good faith attempt to pass all of its provisions. This movement could be credited with stopping Hillarycare, enacting welfare reform, and reducing certain key taxes.

But in the years since, he has vocally supported programs like the costly Medicare Part D, teamed up with Hillary Clinton on healthcare, and supported mainstream Republican candidates over Tea Party challengers.

What happened? Clearly, Gingrich has been building bridges in order to be seen as a moderate candidate for his Presidential run.

If only he had kept to his original firebrand style, he might have had a shot at getting something done in the White House. Unfortunately, trying to become part of the establishment is a game with no end, and therefore Gingrich is likely to continue “reaching across the aisle” to author costly legislation. If he announces a Contract with Austerity, maybe I’ll change my tune.

Gingrich Presidency:

  • Bullish for gold
  • Very bearish for USD

How Important Is the President?

Despite what the media would have you believe, the President is not all-powerful. In fact, a President only has limited powers compared to Congress. Without the support of Congress and the American People, a President can be rendered a lame duck early on – like Jimmy Carter was.

The direction of gold under most candidates is fairly easy to predict – it will continue appreciating against the falling US dollar. This is simply because these candidates will not even attempt to address the disastrous fiscal and monetary policies that have brought us to this point.

The price direction under Ron Paul (and also Gary Johnson), however, would be less predictable. I believe both men would try their best to reverse the US decline that my strategy is insulating against.

In any case, even an authentic campaigner who understood the calamities of money-printing would be hard-pressed to actually save the dollar at this point. The history of fiat currencies has few – if any – examples of monetary debasement being reversed before the currency falls apart – and many cases of gold proving the superior asset.

Barack Obama: The Worst-Case Scenario

There is one candidate in 2012 that we can be sure won’t even try to save the dollar, and that is President Obama. From his doubling down on the bailouts to his faithful support of Chairman Bernanke, Obama has done almost everything in a President’s power to hasten the dollar’s demise.

If he is re-elected, which still seems like a possibility, then you better put on your mining hats because the gold rush is on!

Follow us on Twitter to stay up-to-date on Peter Schiff’s latest thoughts: @SchiffGold
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POSTED ON November 3, 2011  - POSTED IN Original Analysis

Casey Research’s Gold Commentary

The following conversation took place between a friend’s son and me. He’s a bright but relatively young investor. He had purchased some gold based on some things I’d told his father. Shortly afterward, the price dropped hard. As you’ll see, he was not very happy with my advice and said so in an email to me. So I called him…

I: Sounds like you’re upset.

Friend: Yeah, that’s putting it mildly. What the hell am I supposed to do now?

I: Because the gold price has dropped?

Friend: Yes! It’s down 15% in a month! I thought you said this was going to be a good investment.

I: It is. And it will be. You might even consider buying more here if you have the funds.

Friend: I have some other money, but why would I put it in gold? It’s losing money.

I: Because it’s on sale. Because it’s cheaper now than when you bought it. And especially because none of the reasons for buying it have gone away.

Friend: That doesn’t mean it’s going to go back up.

I: As I told your dad, there are no guarantees, but I think it will have to go higher. Either way, it will hold its purchasing power over time. We’re holding it as an alternate currency, a more sound form of money that can’t be debased.

Friend: Yeah, well, my money just got debased, big time. It needs to go up 20% for me just to get back to even.

I: Five years from now your dollars will have lost at least 10% of their value, based just on current trends. There’s a good chance it will lose more than that. And gold will probably rise more than 10% a year.

Friend: [silence.]

I: Look, I know you’re upset, but I’d hate to see you bail. This is one of the best investments we can make this decade.

Friend [relenting a little bit]: You really believe that.

I: I can’t promise you anything, but yes, I do.

Friend: And that’s because you think inflation is coming.

I: It’s for a lot of reasons, and that’s one of them. Inflation is virtually baked in the cake; the dollar’s long-term problems will be impractical to resolve; and the global economy is on high alert. These are exactly the kind of circumstances gold is meant for.

Friend: Then why is it falling?

I: Institutions need cash and liquidity, and gold offers a bid. Besides, nothing goes up in a straight line, and gold had just run up 35%. It was time for a break.

Friend: So this big drop really doesn’t worry you.

I: It doesn’t. I’m buying. In fact, I’ll prove it to you – send me your gold and I’ll buy it from you.

Friend: [Silence.]

I: I know it doesn’t feel good right now, and it may take some time for it to make another new high, but gold is too important not to own here. It’s a long-term trade, so plan on holding it for a while. In fact, if it helps, just forget about the fact that you own it – go do something fun and have a beer at the pub.

Friend: [a little chuckle].

I: I don’t think you made a mistake buying at the price you did, in spite of it being lower now. Odds are high you’ll be happy in a few years.

Friend: [pause] All right…

I’m glad my son’s friend decided to hold on, because that conversation took place in June, 2006! He’d bought gold at around $700 and watched a month later as the price fell to as low as $567.

Gold ended up declining a total of 21% in just five weeks before bottoming, after a run-up of 35% (sound familiar?). And yes, it took over a year before it hit a new high.

Yet, my son’s friend – now older and wiser – wishes he could go back in time and make the same mistake again and buy gold at $700. His investment is sitting on more than a double, in spite of buying at a temporary peak.

I think that a few years from now we’ll all wish we could go “back in time” and buy gold at $1,700. And I believe you’ll still feel that way if gold falls to $1,500, as some writers are projecting.

I think this because circumstances now are worse – and hence more bullish for gold – than they were in 2006. Look at how much money we’ve printed (the monetary base now exceeds $2.6 trillion, a mind-boggling 200% increase since 2006). Look at the state of the global economy: highly vulnerable and propped up by governments. Consider the lingering and inescapable predicament of many European nations – how, exactly, will this be resolved in a healthy way? Ask yourself if the outlook for the US dollar is out of the woods (roughly 10% of federal revenue now goes solely to debt payments – a figure that is projected to triple). Explain how the reckless path of deficit spending will shift without causing some kind of major impact on the economy (history shows abject deficit spending leads to economic downfall, virtually without exception). Tell me how we avoid massive inflation, an outcome that seems so certain at this point that about the only way to avoid it would be a massive global meltdown – and even then, the Fed would surely print to oblivion.

Like I told my son’s friend, nothing is guaranteed. But until real interest rates are positive again, government leaders instigate honest solutions to our debts and deficits, the global economy becomes an engine of growth, the sovereign debt issues in Europe are genuinely resolved, and global currencies – especially the US dollar – are strong again, I’m buying gold.

Yes, there will be volatility. And yes, a short-term “solution” to what seems like certain default in Greece, for example, would cause some investors to sell gold. But like in the spring of 2006, these are temporary, short-term fixes only. For the tumult that is most likely ahead, there simply isn’t any better currency protection than gold and silver.

Join me in calling your favorite bullion dealer and making the mistake of buying gold at $1,700.

POSTED ON October 31, 2011  - POSTED IN Key Gold Headlines

China Buys Gold to Challenge US Dollar
Al Jazeera – America’s diplomats know the world will one day pull the plug on the US dollar’s life support system. A recently published, unredacted Wikileaks cable from the US Embassy in Beijing shows that the concern has, in fact, been at the front of their minds. The cable quotes an editorial in a Chinese government-sponsored newspaper claiming Beijing is increasingly buying gold to encourage the rise of monetary alternatives; in effect, as the cable quips, to “kill two birds with one stone” by simultaneously undermining the US dollar’s and euro’s status as reserve currencies.
Read Full Article>>

Hedge Fund Heavyweight Sees Gold at $2,200
Bloomberg – Tony Hall, the moonlight boxer and hedge-fund heavyweight who returned a whopping 33 percent for his clients last year, prefers to fight from the gold corner. Golden-glove Hall believes that the yellow metal could work its way up to $2,200 an ounce by the end of 2011. Hall notes that in today’s turbulent economic environment, gold is attractive due both to its safe-haven and inflation-hedge qualities. For Hall, the latest correction in gold to the $1,700 level is a good opportunity to jump back into the ring.
Read Full Article>>

Gold-Backed Dollar Puts ‘Fair Value’ at $10,000 an Ounce
Bloomberg – If every US dollar in circulation were actually backed by the full faith and credit of incorruptible gold and not by politicians’ hollow promises, you would need approximately 10,000 greenbacks to buy one ounce of the yellow metal, a recent report maintains. Dylan Grice, a London-based global strategist at French bank Société Générale, crunched the numbers and says that the $10,000 figure is the actual “fair value” of gold. Significantly, the calculation suggests that in playing catch-up, gold has the potential to quintuple its current spot price.
Read Full Article>>

Industry Eyes Gold at $2,000+
The Globe and Mail – According to the average prediction of participants at the London Bullion Market Association’s conference, the gold industry’s biggest annual gathering, gold is primed to crack the $2,000 an ounce threshold over the coming year. Participants expressed über-bullish sentiments based on their direct experience with buyers and sellers. For instance, Steven Nathan, marketing director at the Rand Refinery in South Africa, had this to say about the popular Krugerrand coin: “Demand is insatiable. It’s the strongest period ever right now.” Incidentally, in years past, the conferences’ average predictions have often turned out to be excessively cautious.
Read Full Article>>

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POSTED ON October 28, 2011  - POSTED IN Original Analysis, Videos

By Peter Schiff

Last week, I spent the afternoon visiting the Occupy Wall Street demonstrations in lower Manhattan. I brought a film crew and a sign that said “I Am The 1%, Let’s Talk.” The purpose was to understand what was motivating these protesters and try to educate them about what caused the financial crisis. I went down there with the feeling that much of their anger was justified, but broadly misdirected.

POSTED ON October 26, 2011  - POSTED IN Original Analysis

By Peter Schiff

President Obama today announced a plan that will ensure students are able to commit to higher levels of federally backed student loans. By limiting student obligations to repay, and by passing more of the repayment burden onto taxpayers, colleges and universities will be able to continue to raise tuitions at a rate that outpaces nearly every other cost center in the American economy. The move will come as a great relief to an education establishment increasingly concerned that students might no longer be able to afford skyrocketing tuition rates.

POSTED ON October 18, 2011  - POSTED IN Original Analysis

By Peter Schiff

Herman Cain has been gaining much traction with his 9-9-9 Plan, a bold proposal to replace our dysfunctional tax code with what could be a simpler, less invasive, and more economically stimulative alternative. While I don’t agree with the full spectrum of Mr. Cain’s policy choices, I applaud his courage on the tax front. Judging by his rising poll numbers, this appreciation is widely shared. However, the plan has deep flaws, the most glaring of which is its creation of a hidden payroll tax which represents a fourth “nine.” This serious pitfall has been unmentioned by Mr. Cain and overlooked by those who have analyzed his plan.

POSTED ON October 4, 2011  - POSTED IN Original Analysis

Jeff Nielson’s Gold Commentary

It has been a rough month to be a precious metals investor. However, irrespective of whether we are talking about markets or life in general, whenever we encounter any short-term turbulence, we need to step back and look at the big picture.

The main reason to do this is that, being human, these short-term events provoke our emotions: exuberance if our investments are suddenly rising, and fear or despair should they suddenly decline.

When this happens, many lose sight of the fact that short-term movements may have no relevance to a longer term trend, and certainly that short-term events are rarely the cause of those longer (and more stable) trends. Look at a one-week chart of the price of gold recently and one might be tempted to do their best impersonation of Chicken Little. However, look at a ten-year chart and the recent pull-back brings but two words to mind: “buying opportunity.”

gold price kitco chart

Nielson Chart 3 – GOLD 10YR
Source: Kitco.com

Conversely, for those investors who prefer the perilous world of US equities, the Dow Jones Index has spent the last ten years “breaking 10,000” – having done so more than 25 times, most recently in 2009. One look at a ten-year chart of the Dow and I’m thinking that’s one heck of a merry-go-round.

DJIA 10 Year Price

DJIA 10YR
Source: Google Finance

And 10,000 on the Dow today is not what it was ten years ago. Rather, Washington’s Plunge Protection Team has used the printing press to keep the stock market afloat.

Take a look at the following chart of the Dow in terms of gold. Since gold doesn’t rise in value as much as keep its value versus falling fiat currencies, this chart gives a clear picture of how much purchasing power an investor would have lost buying the Dow in 2001.

DOW Gold 10 Year Price

Nielson Chart 2 – DOW GOLD 10YR MOD
Source: Fred’s Intelligent Bear Site

Obviously, gold has been the place to be for the last ten years, while Dow stocks have seen about as much appreciation as that car in your driveway.

Trends do change, however. So, the question becomes is there any reason for US investors to believe that the future will be significantly different for either gold or the Dow? In short, no.

While entire books could be written about all the bullish fundamentals currently favoring precious metals, two words will do: “competitive devaluation”. Prior to the “Crash of ’08”, the price of gold had nearly quadrupled versus our depreciating fiat currencies – while the price of silver quintupled! With most of the world’s governments now racing to drive down the value of their currencies, gold’s long-term performance should continue to improve going forward.

For US equity markets, the future is not nearly as bright. The “record earnings” that many large US corporations now boast about have come at the expense of stripping millions of American workers (and consumers) of their jobs. High profits overseas will continue to be offset by weak demand and shrinking profit margins domestically. Since US tax law discourages these firms from “repatriating” these overseas profits, I wouldn’t expect them to appear in the form of dividend checks to the American stockholder.

It is said in markets that “the trend is your friend.” This is abundantly true for gold investors, especially given the current price reduction.Meanwhile, US equity investors should be asking themselves,”With friends like these, who needs enemies?”

POSTED ON October 3, 2011  - POSTED IN Original Analysis

By Peter Schiff

In today’s investment landscape, risk can come in all shapes and sizes. When structuring a stock portfolio most investors try to gauge the risk in buying particular stocks. Savvier investors also factor in sector risk, business cycle risk, and recession risk. Cautious investors may try to mitigate these risks by favoring bonds over stocks. But even then they must contend with default risk, interest rate risk, and in the case of sovereign debt, political risk.

POSTED ON October 1, 2011  - POSTED IN Original Analysis

By Peter Schiff

The past couple weeks have seen a strong pullback in both commodity prices and stocks. Gold fell sharply off its peak after soaring just past $1,900. Volatility in commodity, currency, and equity markets has been very high recently, and these short-term price movements have Wall Street pundits in an uproar.

As gold prices soared, many advisors recommended investing in the yellow metal with appeals to the “bandwagon effect”. A rising price, they argued, indicated changing sentiment, and thus future appreciation. For those who bought on this reasoning, a falling price is a bad omen.

In addition, for a while, gold prices were rising even as stock prices were falling. As a result, some investors bought gold to hedge stock market risk. When gold eventually followed equity prices lower, these trades were unwound.

But as my readers know, following the crowd has never been the reason to buy gold. After all, that same logic would have recommended buying a house in Phoenix five years ago. Since the fundamentals still point to gold’s long-term viability, our phones have been ringing off the hook with customers smartly seeking to take advantage of the dip.

Unchanging Fundamentals

It’s important to understand the fundamental reasons for owning gold, and those reasons have not changed. The US government embarked on a decades-long spending spree of historic proportions. To finance the resulting debt, the Federal Reserve is printing money furiously. Because most every central bank governor appears indoctrinated in the Keynesian economic philosophy, foreign central banks are simultaneously printing euros, yen, francs, yuan, and pounds to “keep up.” Of course, this competitive devaluation actually represents countries shooting themselves in the foot.

Don’t expect any abrupt changes either. The Fed’s philosophy – a resolute faith in central planning and debasement – has been unchanged since Paul Volcker stepped down as Chairman in 1987.

Rather than considering any change of direction, the Federal Reserve Board is likely asking itself: “Should we print $50 billion or $500 billion in our next round of stimulus?” “Can the ECB bailout Greece now or do we first need to bail out the ECB?” “Should we call our money-printing’liquidity assistance’ or ‘quantitative easing’?”Or perhaps, “Do we have enough ink refills for all those printing presses?”

You may think I’m joking, but this is quite serious. While monetary policy was bad under Greenspan, Ben Bernanke has literally instituted a revolutionary devaluation program for the dollar. And gold is the only way to avoid his guillotine.

True Value vs. Spot Price

Let’s remember that it is the fundamental value of an asset which dictates its long-term market price. Yet for some reason, many see this relationship backwards – they use the short-term market price to extrapolate the fundamental value. Consider a car on the dealer’s lot: if the price of the car falls tomorrow, it becomes a better deal. If the price rises tomorrow, the car has becomes less attractive.

This principle is equally true in long-term investments. I believe that gold’s fundamental value is far higher than $1,600, and far higher than $2,000. So, while it may be unsettling for some of those who own gold to see steep short-term price declines, remember to focus on the fundamental value of the asset, not the spot price on the market today.

Has the fundamental value of gold fallen in these past two weeks? Quite the opposite.

A Debt-Laden House of Cards

The Fed is still trying to find ways to manipulate the bond market with the newly announced “Operation Twist.” This is yet another plan to suppress yields, encourage spending (as if too little spending was America’s problem), and paper-over the untenable interest payments hanging over Washington. The manipulated US bond market is perhaps the greatest bubble in existence. Further manipulation only makes it more unstable in the long-term, and when that bubble bursts, gold should skyrocket.

Meanwhile, the European debt crisis is quickly spreading to Italy. On Sept. 28th, Italy was selling bonds at yields twice as high as the previous sale at the beginning of the year. The ECB may be able to keep Greece afloat, but Italy is the eurozone’s third largest member. That’s a load too heavy for the ECB to bear.

This is especially true in the wake of Moody’s downgrade of two of the largest French banks – Societe Generale and Credit Agricole. As reported in the Wall Street Journal, “[Moody’s] said its decision to downgrade the banks included the assumption of debt restructuring that would cost investors up to 60% on Greek sovereign debt, 50% on Portuguese and Irish debts, 10% on Spanish debt and 7% on Italy’s debt.”

In other words, the Western financial system is a debt-laden house of cards. This is the root of the current market panic. But what’s harder to explain is why investors are responding by selling gold and buying dollars and euros. Then again, I was always told not to look a gift horse in the mouth.

Keep Calm and Carry On

Do not get caught in the exuberance or pessimism of short-term movements, even if they’re sharp. Observe the fundamentals – the events in Europe, the looming budget calamity in the US, central bankers’ steadfast strategy of debasement, and emerging markets’ continued diversification into precious metals. These are the main drivers for gold’s long-term appreciation.

To my readers who may have purchased metals just before this pullback, your concern is understandable. But I believe this bull market has a long way to run, and the rise up ahead looks even steeper from these levels.

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