Gold and Energy Advisor: Real Wealth #270, 09/14/2010

Gold is up sharply today and hitting a new historic high on a combination of new inflationary fears out of the United Kingdom and weaker-than-expected industrial production being reported out of the European Union.

The weaker industrial production numbers are fanning growing investor concerns that a more serious European Sovereign debt crisis may be on the horizon.

I’ve reported on the economic and political strains taking place in France, Italy, Belgium and Netherlands just a few days ago and the serious risk of a new, more virulent European Sovereign Crisis taking place.

I’ve pointed out that the needed support from the larger, more affluent member nations of the European Union is being put in question as a result of the deepening economic malaise throughout Europe. The economic slowdown throughout much of Europe is serving to bolster support for the political opposition in those countries which are far more nationalistic in their views and less sympathetic to supporting the Euro.

Put simply, the weakening of Europe’s economies is creating a political environment that is shaking the underpinnings of support for the steps needed by the larger member nations of the European Union to insure the very survival of the Euro. It’s becoming that serious.

Keep in mind, fears over the sovereign debt crisis in Europe earlier this year were quelled only after serious assurances by the economically stronger EU member nations (Germany, Italy and France) that they would step up and insure a strong Euro. These assurances and a stress test of Euro-land’s banks helped diffuse the crisis for several weeks, but now that it appears the support promised is in question, investors are growing increasingly concerned. These renewed fears are being reflected in the new record price for gold.

Meanwhile, gold’s breakout to new historic highs from a technical analysis standpoint is extremely bullish. There’s no upside resistance on the gold chart, thanks to breaking to new highs. As a result, I believe it is extremely likely that we could see gold break through the psychological $1,300 level and spike even higher on speculation and investor fear. A great deal depends unfolding not only in Europe but also here in the United States.

My biggest concern the past 8 years has been the possibility of a massive monetary crisis. The explosion of U.S. Federal debt, the credit collapse and economic recession here in the United States and Europe has only served to deepen my fears that a monetary crisis could be ignited. In which case, a spike in the price of gold to $2,500 and quite possibly to $5,000 may lie ahead.

The Federal Reserve and the U.S. Administration is focused on guarding against deflation and as a result, is pursuing monetary policy and spending intended to jump start the economy and lower unemployment. Both are increasing the already massive Federal debt without really addressing the weak U.S. economy.

I often point out that owning physical gold is the best insurance against the greed and stupidity of politicians. If, in fact a more severe sovereign debt crisis erupts in Europe in the coming months ahead, the risk of a monetary crisis here in the United States will grow. I continue to urge subscribers to make sure you keep at least 15% of your investment portfolio in physical gold, platinum and silver.

In the event of a monetary crisis, the value of the U.S. Dollar, and for that matter, any of the world’s currencies could evaporate over night.

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Gold Breaks Out To New Record Highs!