$40 cents club, page-663

Some thoughts also crossed my mind on where the gold price is headed. Nothing is certain in this intricate web of forces that impact its daily price, so at best any guess is just based on likely probability.

Gold price accession into recession?

l read a lot of commentary on the state of the U.S. economy and also gold but at the end of the day its just someones opinion and they might be wrong. When 5 or 6 or even more independent scolarly people start saying the same or similar thing, l sit up and take note, figuring they probably know more than l do.

Peter Schiff, George Gammon, David Rosenberg and Jim Rickards all herald an imminent financial melt down. The common theme is, to a man, they are bewildered the Americans have been able to kick the can down the road this long without any real consequences. Bail outs and money printing has basically been the answer but that causes inflation, de-bases the currency and causes unsustainable debt levels. You can get away with it for just so long but eventually the medicine becomes worse than the disease ie: the unsustainable debt at 2% interest, becomes catastrophic at 8 or 10% interest rate levels. Right now, the U.S. spends more on interest rate debt repayment than what its annual military budget is and things are about to get a whole lot worse.

Peter Schiff, chief market strategist for Pacific Asset Management, thinks gold is on the verge of a new bull market lasting a number of years. He says some people mistakenly think that the recent gold sell off from its historical high, was some kind of blow off top marking the end of the current bull run.

Things are different this time and they really are. The FED is running in uncharted territory and trying things they have never done before. Trying things in the hope they might work like savage in terest rate increases to shock the economy into submission. Normally golds value decreases significantly in an environment of rising interest rates, strengthening dollar and attractive bond yields. Not this time. Golds remarkable resillience has rallied against these market forces and has set a strong support base around U.S. $2000 dollars.

His impression about inflation is that the current level is about as low as its going to go and that the only way to really put the inflation genie back in the bottle, is to be a lot more savage with interest rates that trash the American economy and force the U.S. Government into insolvency - which the FED wont do at any time, especially an election year. Rate cuts are on the agenda for next year despite what they say publically. The FED will respond to the coming fiscal crisis the same way they always respond by printing money, creating even more inflation and then the bottom is going to drop out of the U.S. dollar as inflation goes through the roof. Gold is going to lead the way as it always has done by preserving wealth and protecting capital. These are the reasons gold is on the threshold of substantially new highs that will make U.S. $2100 dollars look rediculously cheap.

Just an opinion though.