Real Wealth #276 10/06/2010
Gold Continues to Climb. Here's What to Expect and Why...
Gold was up a whopping $27 yesterday and is up another $6 today as I write you, hitting a new record high of $1,346 an ounce. Meanwhile, there's a a great deal of options buying at the $1500 level going out to November, December and January. This could act as a magnet. This morning on CNBC the reporter covering precious metals reported that a good many traders are predicting $1400 gold by the end of the month.
All of this action in the Gold market has resulted in a press avalanche. I’ve lost count of how many press interviews I have done in recent days on why gold is soaring in price.
Most reporters are focused on the comparison of 1980 and today and are asking how gold could be rising in such a low inflationary environment.
Few members of the press – and for that matter investors and speculators – stop to consider that the rise in the price of gold is tied to the value of the US Dollar and not to the rate of inflation.
The value of the Dollar, of course, is tied to full faith and credit of the U.S. government.
It’s the level of faith and credit of the U.S. Government that’s become a growing problem during these past 10 years, as gold has steadily risen.
Proof of the declining value of the U.S. Dollar was just emphasized by the Chairman of the Federal Reserve, Ben Bernanke.
On Monday, Federal Reserve Chairman Ben Bernanke warned that the United States faces serious long-term challenges that could threaten the nation’s economic future.
In prepared remarks from a speech to policy analysts in Rhode Island, the central bank chief said the U.S. budget deficit should narrow over the next few years as the financial markets improve. But he said policymakers will need to make some difficult choices now to put the nation back on a path toward long-term fiscal sustainability.
"An improving economy should reduce near-term deficits," said Bernanke, the nation's top monetary policymaker. "But our public finances are nevertheless on an unsustainable path in the longer term, reflecting in large part our aging population and the continual rise in health-care costs."
Bernanke acknowledged that the current deficit, which is at its highest level since World War II when measured as a percentage of the national income, is largely a result of the financial crisis and the economic recession it spawned in 2008-2009.
But the Federal Reserve Chairman pointed out the U.S. economy remains too weak to reduce the deficit significantly over the next year or two, he said. "Indeed, premature fiscal tightening could put the recovery at risk."
In a nut shell, Bernanke is saying the future of the U.S. Dollar is entirely in the hands of the politicians in Washington and its only chance for survival is for those politicians to take steps to put our country’s economic house in order. Which, of course, means tackling government spending on entitlement programs and reducing the nation’s “on the books” and “off the books” spending and guarantees.
It’s not going to happen. The November election is going to make reforming the way and the amount the U.S. Government spends even harder. A smaller Democratic majority in the House and Senate, much less the prospect of a Republican majority in the House of Representatives, will mean a legislative standoff that will be incapable of taking the steps needed to address the long term threat to the value of the U.S. Dollar.
I’m not implying that either a veto-proof Democratic or Republican majority would do anything to help the situation. The problem is much deeper. As my father-in-law pointed out to me the other day, “The election ads being run this year are all so negative that it paints literally every candidate for the House and Senate as a crook or tool for special interests” ... “Literally no one is confronting the issues”.
Gold’s run up in price is an expression of the danger this country’s currency and economy faces and the danger is going ignored. When I predicted $1,000 gold was ahead of us in 2003, I hoped I was wrong.
When $1,000 gold was hit in 2008 and fell back to the mid $800’s, I predicted $1,200 gold in 2009 and I still hoped I would be wrong. I was, of course, right on target.
Last year as gold pulled back under $1,200, I predicted $1,400 to $1,500 gold this year and hoped again I would be wrong.
I’ve hoped I would be wrong about gold rising in price for one simple reason. Every leap in the price of gold is an expression of the continuing failure of the U.S government to put its economic house in order.
Higher gold prices are the expression of the lack of faith and confidence in the U.S. Government’s ability of putting its fiscal house in order. Every jump in the price of gold is the expression of the building danger of a currency crises that will make the credit crises, banking crises even the tech and 9/11 stock market meltdowns during the past 10+ years look like a walk in the park.
The danger of a currency, monetary crisis is building and gold’s rise in price is a prime measuring stick of how great the danger is becoming. I have predicted that we will see $2,000 gold in the next few years and have fretted over the risk of gold surging to $5,000 an ounce. I hope I’m wrong; but so far there hasn’t been a single reason to believe that the United States government will be able to put its finances in order either in the short term or long term. If anything, the signs and warnings like Chairman Bernanke’s warning yesterday, continue to come one after another and are being ignored.
You shouldn’t ignore the warning signs. That’s why I recommend three steps to protect yourself and family from a devastating currency/monetary crisis.
Step #1: Do what China is doing. Buy natural resource stocks, especially the oil stocks we recommend here in the Gold and Energy Advisor. If you’re just starting out, take a good look at the August Monthly issue of the Gold & Energy Advisor. Its headline says it all: “These Oil Stocks Have An Average Potential Gain of 258 Percent in the Next Five Years...” Load up on the stocks closest to the prices indicated in that issue. Many of the stocks recommend have already started to climb sharply, but several are within a few dollars of the prices recommended. With oil trading at $82 and change, look for any pull backs to get in on the other stocks recommended.
Try to buy shares in lots of 100 so you have the ability to write covered calls on your stock positions. We’ve used covered call and even put writing steadily since the inception of the Gold & Energy Advisor to rack up enormous profits – even when the price of oil pulled back. A weakening Dollar, a currency or monetary crisis will send the price of oil well past the $140 high. The oil stocks my staff and I recommend should more than exceed my prediction of an average gain of 258%.
Step #2: Buy physical gold, silver and platinum. I hope I’m wrong, but $2,000 plus gold looks to me like a guaranteed event. This means $3,000 platinum and possible $50 silver.
The legislative and executive branches of our government lack the will to tackle the long term economic risks our country is facing. This means sooner or later my thesis of currency or monetary crises will occur. When that happens, we’ll see gold, silver, platinum and oil soar in price. You can put physical gold, silver in your IRA or buy it for your portfolio by calling my precious metals brokers at Finest Known, LLC Toll Free at 1-866-697-4653.
Step #3: If you have any speculative blood in you what-so-ever, I encourage you to subscribe to my Gold and Energy Options Trader.
I sent you an invitation a few days ago to subscribe. In the last 37 months, during what most economists would agree has been the worst economic climate since the great depression, the longest post war recession my Gold and Energy Options Trader has generated over 2,498% in cumulative winning trade recommendations.
In just the last several days there have been even more winning trades achieved.
I recommended buying Puts on the S&P Index on September 22 and within 24 hours my subscribers who followed my recommendation to buy then sell took profits of over 18%.
Then on September 28 I recommended buying a Call Spread on Cliff Natural Resources (CLF) and then just two days later recommended taking a profit of 14.6% on the position.
During the same day, I recommended closing a Call position on EOG Resources that I recommended to my subscribers 10 days earlier for a whopping 42% profit.
The profits keep rolling in. The numbers of subscribers to my Gold and Energy Options Trader keep growing and growing as knowledgeable people keep seeing my straight forward approach and amazing track record of winning trades.
I don’t want you to miss out on all the profitable trade recommendations; so I’m allowing you to subscribe to my Gold and Energy Options Trader for the first 30 days for just $1.
That’s right. I’m willing to literally audition for you to win you over as a subscriber for just $1 for the first 30 days. The service is easy to follow, we have an extensive on line options education program linked through on the home page so if you haven't traded options before its easy to learn how to do it. The beauty of options of course is your risk is limited to the cost of the options we recommend. There are no margin calls. Meanwhile options allow you tremendous leverage and can bring in sensational profits. In a word where making 3% on your money in a year is the new normal, racking up profits of 14%, 18% even 42% in a matter of days is a sensational alternative.
Here’s a link to the invitation I sent you a few days ago with all the details about my Gold and Energy Options Trader which will also allow you to take the 30 day trial subscription for just $1.
Don’t miss out on my options recommendations.
I’ve proven over and over again the ability to generate winning option trade recommendations even in the worst economic environment.
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