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Jeff Clark is Editor of BIG GOLD and Explorers’ League at Casey Research (http://www.caseyresearch.com). Having worked on his family’s gold claims in California and Arizona, as well as a mine in a place to remain nameless, these days Jeff Clark focuses on following some of the most successful... More
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  • Dear Harry Dent: Wanna Bet?

    Some of you may be aware that investment guru Harry Dent has publicly stated that gold will fall to $250-$400. He specifically predicted:

    Around $700/ounce is a certainty in gold by 2015 to 2016, and $250 is a possibility well down the line by 2020-2023.

    His forecast is largely based on his belief that deflation will prevail.

    Governments are fighting deflation. If government stimulus fails, we will have deflation, not inflation.

    And he claims that gold bugs are wrong about gold's future price because they don't understand how markets work.

    Central bank stimulus has created a whole new set of financial asset bubbles that will have to burst. That is its consequences, not rising inflation that most gold bugs (who do understand the financial and debt crisis) warn about.

    As a gold analyst who's spent every day of the last seven-plus years watching this market, I can't let this pass. I'm sure gold will not fall to $700, much less $250-$400-not in real terms (who knows if the US dollar will even exist in 2020?… Or maybe there will be new dollars with several zeros cut off).

    Is this just because I'm a stubborn gold bug? No, because I agree that we're seeing some deflation, too. But I definitely think some type of crisis is headed our way, and gold does well in crises-even deflationary ones.

    Is it perhaps because I don't like Mr. Dent? Not at all-at my suggestion, he was a speaker at one of our Summits.

    Quite simply, I think Harry Dent is resoundingly wrong. And I'm so sure he's wrong that this is a public invitation to him to enter a wager with me and put his money where his mouth is, which I'll detail momentarily.

    Why Harry Dent Is Wrong

    There are a number of reasons why I think Mr. Dent will be wrong about the future gold price…

    1. Deflation does not guarantee lower gold. It's true that some significant deflationary forces have developed. Check out what's occurred since early November.

    • The 10-year Treasury fell to a paltry 1.7% yield.
    • The oil price dropped to $50.
    • January retail sales recorded the worst back-to-back decline since October 2009.
    • Commodity indexes have fallen by over a third.
    • The Baltic Dry Index, generally regarded as the best known global shipping index, is now at its lowest level ever.
    • According to the Financial Times, there is now $3.6 trillion of government debt around the world with negative interest rates. Two-year government bonds are negative in Germany, Finland, Austria, Denmark, France, Holland, Belgium, Slovakia, Sweden, and Japan.

    These are all serious deflationary trends. But what has gold done during that period? It is up 7.5%.

    Even gold's negative correlation with the dollar has bucked its trend.

    This dollar/gold relationship has broken down other times, too. According to the Wall Street Journal:

    • From January 11 to June 10, 2010, the DXY (US Dollar Index) rose almost 16%-but gold climbed nearly 12%.
    • Since the turn of the century, gold and the DXY index have both finished higher year over year five times-in 2001, 2005, 2008, 2010, and 2011.

    So why has gold risen during some of the most ominous deflationary trends we've seen in a long time?

    Because what has been supportive for the dollar has also been good for gold.

    In other words, gold is not just about inflation vs. deflation. Nor is it about the USD vs. the euro or even supply vs. demand. It's about fear and chaos vs. confidence and stability.

    Here are some recent examples of people buying gold for reasons other than inflation:

    • Greek demand for gold coins from the UK Royal Mint has risen as a result of the country's political and financial turmoil. They're buying because, as Matthew Turner of Macquarie Bank put it, "The one thing everyone knows about gold is it is a good thing to hold if your currency is about to devalue."
    • After the Swiss central bank introduced a 0.75% negative interest rate on some deposits last month, investors bought more gold in lieu of holding Swiss franc cash deposits, according Vontobel Holding AG, a Swiss bank and wealth manager. "We keep noticing that gold is coming back into favor with investors," said CEO Zeno Staub.
    • Other European countries have seen a spike in gold demand due to the massive QE effort undertaken by the ECB and the anti-bailout party winning in Greece. German coin dealer Degussa reported a 35% year-on-year increase in gold coin sales in January. The Austrian Mint said sales of Vienna Philharmonic gold coins rose 6% last month.

    So the investor who's convinced deflation is coming shouldn't overlook the fact that other factors can lead investors to buy gold. Keep in mind that most true deflations cause a crisis-or are caused by a crisis-and for thousands of years, crises have pushed people into gold.

    Consider how gold has performed during high periods of crisis and fear as measured by the VIX.

    During these eight periods of high systemic risk, gold rose every time but one-and stock markets fell in all of them. This doesn't mean the price couldn't decline in the initial phases of a crisis, but it does show that gold is strong when fear is high.

    2. True deflation will lead to higher inflation.

    If we do get massive deflation, it will actually spur greater inflation.

    Why? Here's a hint…

    An emergency meeting was held just last week regarding the solvency of the Disability Trust Fund. The problem is that benefits have exceeded tax receipts for several years now, and the shortfall has reached roughly 35%. The government itself has said the fund will officially go bankrupt next year.

    It's not the only one.

    Projected Government Bankruptcies
    Highway Trust Fund2016
    Disability Trust Fund2016
    Pension Benefit Corp2024
    Hospital Insurance2030
    Old Age Insurance2034

    And did you know that Social Security took in $752 billion in 2013, but paid out $822 billion in benefits? It and Medicare are clearly on an unsustainable path, too.

    Yes, this is all deflationary. But here's the question: how will the Fed and politicians respond? They might reduce or delay benefits and raise taxes, but those are politically costly moves, and some officials have already publicly stated that they will print what they don't collect in revenue.

    Printing money is extremely inflationary, especially when you've already more than tripled the monetary base since 2008. Frankly, doing more of the same scares me, because someday all this monetary dilution will come home to roost. We face the very real possibility that the US currency will not just be damaged; it could be destroyed.

    History is very clear on this point: currency crises lead to flights to gold.

    But if Deflation Wins First…

    But what happens to gold if we first go through a deflationary bust?

    There aren't a lot of modern-day examples of deflation. The Consumer Price Index (NYSEARCA:CPI), as faulty as it may be, has registered only four declines since 2000, and all were short-lived. The CPI fell:

    • August to October, 2006;
    • July to December, 2008;
    • March and April, 2009; and
    • December, 2014.

    That's it. You can find other fleeting periods further back, but nothing long enough to draw any strong conclusions.

    The only example we have of true deflation is the Great Depression. You'll recall that the United States was on a gold standard at the time.

    But there's still a lesson to be learned.

    First, on April 5, 1933, President Roosevelt issued an executive order forcing delivery (confiscation) of gold owned by private citizens to the government in exchange for compensation at the fixed price of $20.67/oz. Less than nine months later, he raised the gold price to $35, effectively diluting the dollar in every wallet 41% overnight and swindling everyone who had turned in gold. So even in the midst of one of the biggest deflations the world has ever seen, the US government raised the gold price.

    Second, the only way citizens could effectively own gold after Roosevelt's confiscation was to buy gold stocks. How did they perform? Well, when the stock market crashed in 1929, gold stocks were part of the general wreckage. The market then rallied and recovered almost 50% of its losses by April 1930, with gold shares again tagging along. It's what happened next that gives us another clue about gold and deflation…

    When the bear market resumed in the summer of 1930, all securities sold off again-except gold stocks. Gold shares stayed basically flat until early 1931, when their appeal to the masses kicked into high gear.

    Look at how shares of Homestake Mining, the largest gold miner in the US at the time, and Dome Mines, Canada's senior producer, performed during the Great Depression.

    CompanyStock
    Price
    1929
    Stock
    Price
    1933
    Total
    Gain*
    Homestake Mining$65$373474%
    Dome Mines$6$39.50558%
    *Returns exclude dividends

    During a period of soup lines, crashing stock markets, and falling standards of living, investors fled to the only gold with liquidity they could own at the time.

    Gold's status as a safe-haven asset during one of the greatest times of economic distress was demonstrated clearly by investors buying the stocks. So while we don't know exactly what an untethered gold price would have done during the Depression, history says it will retain its purchasing power in a deflationary setting regardless of its nominal price. In other words, while the price of gold might not rise or could even fall, it would still provide monetary protection against an unstable economic environment, especially when you consider that most other assets would be in decline.

    All this said, the overriding concern is that in a fiat system-like the one the entire globe uses today-any deflation will be met with an inflationary overreaction by central bankers. And the worse the deflation, the more extreme the overreaction will be. As we've pointed out before, inflation will win in the end because it always gets another turn.

    Think about it: for central banks to be "successful" with their measures, the end result must be inflation. Someday soon they'll get what they want. And when it shows up, the delayed effects of all the money created to that date will start to take hold, meaning there won't be "just a little" inflation. Gold will soar in that environment, not fall.

    Of course, it doesn't have to be an either/or thing. We can have both inflation and deflation, AKA stagflation, like we had in the late 1970s/early 1980s. That's still good for gold.

    3. Gold is already at its cost of production.

    Another reason I'm sure Mr. Dent will be wrong is that $700 is about $400 below the current global average cost of gold production. Even at $1,100 gold, roughly half of the primary gold producers lose money.

    The reason is because the World Gold Council's all-in sustaining cost metric excludes taxes and interest payments (among other items). Adding those in pushes many companies into the red when gold averages $1,100.

    A $700 gold price would be 36% below the current cost of production. That (much less a $250 or $400 price) would kill the industry. But the sector won't shut down, because the world needs and wants gold.

    The Bottom Line

    The basis of my argument is that there is no free lunch from the free-for-all actions central bankers have engaged in since 2008. Inevitably, the future purchasing power of our fiat money will be impacted. I thus think some kind of currency crisis hits in the future, perhaps sooner than skeptics like Harry Dent can imagine.

    There are many examples of what happens to gold during a currency crisis. Last year provided another glaring example. Russia's inflation rate was 11.4% in 2014, and the ruble fell a staggering 46.5%-but gold in rubles rose 73%. In other words, Russians gained more with gold than they lost in ruble purchasing power.

    This didn't occur just in conflict-ridden Russia. The price of gold rose against all currencies in 2014-except the US dollar. Gold was up in the euro, Japanese yen, Swiss franc, Canadian dollar, British pound, Australian dollar, New Zealand dollar, Chinese renminbi, Indian rupee, Swedish krona, Brazilian real, Israeli shekel, and South Korean won.

    As Eric Sprott put it, "Last year, 84% of the world's population would have made money owning gold because of various currency moves-even though gold in US dollars was down approximately 1%."

    We should expect the same reaction with gold in our currency when the odoriferous effluvia hits the fan.

    Gold is not really a commodity or even an investment; it is an alternate currency and a store of value. And if ever there was a period in history for it to be sought as a store of value, the next few years will be among the most acute. Both gold and the US dollar have been pursued during the recent times of distress-but the dollar as a "safe haven" is at high risk. It may rise further yet, but it's far from healthy; the US is the largest debtor nation in the history of mankind.

    There are more reasons-I'm sure you can think of others yourself-but let's get to the wager.

    The Bet

    Mr. Dent, I will bet you an ounce of gold that the gold price never falls to US$700, including intraday, for even one second, within the next two years, based on Comex pricing. You stated in January 2014 that "$700 is a certainty by 2015 to 2016," so I'm giving your forecast even longer to work than you originally projected.

    We'll each store a one-ounce gold Eagle with an independent third party, who will pay the two ounces to the winner the day the bet is concluded, which is two years from today, February 16, 2017. If gold touches US$700 at any point in that time frame, you win. If, however, gold never reaches $700, this lunatic gold bug who doesn't understand how financial and debt crises works wins the bet and takes your ounce of gold.

    I hope you'll take me up on the bet, because that's about the time my son will finish his PhD program, and an ounce of gold will make a nice graduation present for him. It will also reinforce the ideas he's formed on his own about money, as well as the fact that his dad is a stud.

    I do have to give you fair warning, though: I'm so confident that I've already identified a third party, and I will give you its mailing address once you shake my digital hand.

    Mr. Dent, do you really think gold will fall to $700? A gold Eagle says you're wrong.

    I await your reply…

    I'm not just going to win this bet, but I'll win big with my equity investments, because gold stocks will deliver the leverage to gold that they have many times in the past, especially since they'll rise from depressed levels. I plan to make a killing on some special situations-and I have one right now: a new recommendation in the current issue of BIG GOLD. It's one that tripled my money in the last bull cycle and will do it again in the next one. Easy money will be made if you buy now, and our brand-new recommendation is available with a risk-free trial to BIG GOLD.

    Tags: gold
    Feb 18 11:21 AM | Link | Comment!
  • 2015 Outlook: What You Really Need To Know

    In the January issue of BIG GOLD, I interviewed 17 analysts, economists, and authors on what they expect for gold in 2015. Some of those included what we affectionately call our Casey Brain Trust-Doug Casey, Olivier Garret, Bud Conrad, David Galland, Marin Katusa, Louis James, and Terry Coxon. The issue was so popular that we decided to reprint this portion.

    I think you'll find some very insightful and useful reading here (click on a link to read his bio)…

    Doug Casey, Chairman

    Jeff: The Fed and other central banks have kept the economy and markets propped up longer than you thought they could. Has the Fed succeeded in staving off crisis?

    Doug: I'm genuinely surprised things have held together over the last year. The trillions of currency units created since 2007 have mostly inflated financial assets, creating bubbles everywhere. There's an excellent chance that the bubble will burst this year. I don't know whether it will result in a catastrophic deflation, extreme inflation, or both in sequence. I'm only sure it will result in chaos and extreme unpleasantness.

    Jeff: Are we still going to get rich from gold stocks? Or should we face reality and start exiting?

    Doug: The fact so many people are discouraged with gold and mining stocks is just another indicator that we're at the bottom. Gold and silver are now, once more, superb speculations. And I think we'll see some 10-to-1 shots in gold stocks-if not this year, then 2016. I can afford to wait with those kinds of returns in prospect.

    Olivier Garret, CEO

    Jeff: The crash in the general markets we warned about didn't materialize. Have those risks dissipated, or should we still expect to see a major correction?

    Olivier: Last October the risk of a very severe market correction was indeed very serious; hence our call to subscribers to batten down the hatches, tighten their portfolios, and have cash and gold on hand. We warned of further downturn across all commodities, including oil. We also highlighted the dollar would be strong and that an excellent short-term speculation was to be long 10- to 30-year Treasuries, as they would be considered a safe haven.

    Let's look at where we are today. Clearly, the S&P did not extend its correction after its initial dip in mid-October. In light of the possibility of a perfect storm coming, the Fed announced that it may not end QE in early 2015 as anticipated if the economy failed to continue to pick up. Then the Bank of Japan announced its version of QE infinity, followed by the largest Japanese pension fund's decision to invest in equities worldwide.

    The bulls were reassured and came back with a vengeance; the crash was averted. That said, fundamentals are still very weak, and market growth is concentrated within the largest-cap stocks. Mid- and small-caps are hurting, and many economic indicators are still concerning.

    Jeff: What about lower energy prices-aren't these good for the economy?

    Olivier: In theory, yes. In practice, there is another crisis brewing. Most of the development of new shale resources in the US has been financed by debt based on oil prices of $80 and above. This easy debt was immediately securitized, just like home mortgages were in 2003-2006, and we have a monstrous bubble about to pop with oil around $55. The potential risk of another derivative crisis is as high or higher than in 2007.

    Jeff: Does that mean the inevitable is imminent?

    Maybe, maybe not. We know central bankers will do whatever it takes to provide liquidity to the markets. That said, I do not believe central bankers are wizards endowed with supernatural powers that enable them to stem all crises. Bernanke told us in 2007 and 2008 that there was no real estate crisis and that he had everything under control-will Janet Yellen be better?

    My view is that our subscribers should be prepared for the worst and hope for the best. Sacrifice a bit of performance for safety, and use money you can afford to lose to speculate on opportunities that could bring outsized upside. I believe subscribers should continue to hold cash (in dollars), gold (the ultimate hedge against crisis), and stocks in best-of-breed companies that are unlikely to collapse during a financial meltdown.

    For speculations, I still believe that we should be invested in the best gold producers, in well-managed explorers with good management and first-class resources, in long-term Treasuries, and top-quality tech companies.

    Jeff: As a former turnaround professional, what would signal to you that the gold market is about to turn around?

    Olivier: Two things: market capitulation, and valuations for the best companies not seen in decades. The cure for low prices is low prices.

    Cyclical markets do turn around, and I would rather buy low and hold on until the market turns around than buy in the later stage of a bull market. At this point, the gold market presents amazing value for the patient investor. In my opinion, that is all that matters. The gold market may take longer than I want to turn around, but I know I am near an all-time low.

    Bud Conrad, Chief Economist

    Jeff: What role do big banks and government currently play in gold's behavior? Is this role here to stay?

    Bud: I've looked at the huge demand for gold from China, Russia, India, and private investors and been surprised the price has eroded over the last three years. My explanation is that the "paper gold futures market" sets the price of gold, with very little physical gold being traded. There are two parts of futures market trading: one is the minute-by-minute trading of only paper contracts that dominate 99% of the trading, in which every long position is matched by a short position. That is why the futures market is called "paper gold." Almost all trades are unwound and rolled over to another contract. Only a few thousand contracts are held into the second process, called the "delivery process." Just a handful of big banks dominate that delivery process, so they are in a position to affect the market. There is surprisingly little physical gold used in the delivery process compared to the 200,000 ongoing paper trading of the contracts not yet in delivery every day, where no physical gold is used.

    Big players can place huge orders to move the "paper price" for a short term, but eventually 99% of these paper positions are unwound before delivery, so their effect in the longer term is canceled. The delivery process is the only time where physical gold is actually sold (delivered) or purchased (stopped). The gold price can be influenced in one direction in this process by bringing gold to the market from their own account (or the reverse).

    Big banks gain a big benefit from the Fed driving their borrowing rate to zero with the QE policy. Banks lend that money at higher rates and have become very profitable. If gold were soaring, then the Fed would be less inclined to keep rates low, as it would be concerned that the dollar is purchasing less and inflation is returning. So banks are happy to have the gold price contained so the Fed is more likely to keep rates low.

    The above chart shows that in the delivery process for the December 2014 contract, only three banks-JP Morgan, Bank of Nova Scotia, and HSBC-handled most of the transactions. Big banks can act as either traders for other customers or as trading for the banks themselves in their in-house account. In the December contract, 90% of the gold was purchased by HSBC and JP Morgan for themselves, and Bank of Nova Scotia provided over half of the gold from its in-house account. With so few players, the delivery market is prone to being dominated and price being set.

    Jeff: So if the big players influence the market, why should we own gold?

    Bud: I see the regulators issuing big fines to banks who have been caught manipulating foreign exchange, LIBOR, and even the London Gold Fix (which is being changed) as evidence that the methods used to influence the futures market will be curtailed by the regulators. So gold will become the recognized alternative to paper money issued in excessive amounts to fix whatever problems the governments want.

    I also see the collapse of the petrodollar as leaving all currencies in limbo, which will lead to big swings in the currency wars, where ultimately gold will be the winner. Governments themselves are recognizing the value of gold, as I'm sure Russia does after the ruble collapsed in half since last summer.

    David Galland, Partner

    Jeff: What personal benefits have you achieved from living in Argentina?

    David: Most important, my stress levels have fallen significantly. Even though I wouldn't consider myself a high-stress type, I used to be on meds for moderately high blood pressure and for acid reflux… both of which I take as signs of stress. After a few months back in Cafayate, I am med-free.

    Second, living in the Argentine outback provides perspective on what actually matters in life. Life in Cafayate is very laid back, with time for siestas, leisurely meals, and any number of enjoyable activities with agreeable company. There is none of the ceaseless dosing of bad news that permeates Western cultures. After a week of unplugging, you realize that most of what passes as important or urgent back in the US is really just a charade.

    Finally, my personal sense of freedom soars, as life in rural Argentina is very much live and let live.

    In sharp contrast, returning to the USA for even a short visit reveals the national moniker "land of the free" as blatant hypocrisy. There are laws against pretty much everything, and worse, a no-strikes willingness to enforce them. That a person can get mugged by a group of police over selling loose cigarettes tells you pretty much everything you need to know.

    Jeff: Gold and gold stocks have been hammered. What would you say to those precious metals investors sitting on losses?

    David: I doubt anything anyone can say will prove a panacea for the pain some have suffered, but I do have some thoughts. Like many of our readers, I have taken big losses as well, but because I have long believed in moderation in most things, especially the juniors, I have taken those losses only on smallish positions.

    Specifically, about 20% of our family portfolio is in resource investments, with about half in the stocks and the rest held as an insurance position in the physical metals, diversified internationally. So a 70% loss on 10% of our portfolio, while painful, is not the end of the world.

    I guess my primary message would be to continue to view the sector for what it is: physical metals for insurance, and moderate positions in the stocks-big and small-as speculative investments.

    I remain convinced the massive government manipulations that extend into all the major markets must eventually begin to fail, at which time investors will come back into the resource sector in droves. When the worm begins to turn, I anticipate the physical metals will recover first-and $1,200 gold is starting to look like a fairly solid foundation. The BIG GOLD companies, which I'm starting to personally get interested in, will rally soon thereafter.

    When the producers decisively break through resistance levels on the upside, it will be time to refocus on the best juniors.

    But regardless, per my first comment, while these stocks can offer life-changing returns, being highly selective and moderate in the size of your positions is the right approach. Then you can sit tight and wait for the market to prove you right.

    Marin Katusa, Chief Energy Investment Strategist

    Jeff: I loved your book The Colder War. And I liked your concluding recommendation to buy gold. Are events playing out as you expected? And does the fall in the oil price change the game at all?

    Marin: First off, thank you. A lot of personal time was spent completing the book. And yes, most of the events are playing out as expected in the book. I expect this trend to continue over the next decade, as the Colder War will take many years to play out.

    As I stated to all our energy subscribers and to attendees at the last Casey Conference in San Antonio, we expected a significant drop in oil prices, but it has happened a lot faster than I expected. I think we will continue to see volatility in oil; we'll probably get a rally to the mid-$60s for WTI, but I think it will hit $45 before January 1, 2016.

    This definitely makes Putin's strategy harder to implement-but we are in the Colder War, not the Colder Battle, and wars are made of many battles. Putin's strategy is still being implemented, and it will play out over many years.

    Jeff: You're calling for the end of the petrodollar system. This is very bullish for gold, but won't that process take many years? Or should investors buy gold now?

    Marin: The process is well underway, and yes, as I point out in the book, the demise of the petrodollar will take many years-but it will happen.

    Each investor must evaluate his position and situation, but I don't believe anyone knows when the bottom in gold will happen, and I see gold as insurance. You never know exactly when you need health insurance, but speaking from personal experience, it's good to have, and good to have as much as you can afford, because when you need it, trust me, you won't regret it.

    Resources are in the "valley of darkness" right now-but this is part of the cycle. The key is portfolio survival. If you can get to the other side, the riches will be much greater than you can fathom. I'm speaking from personal experience. I've been through this before, and while it was stressful, what happened on the other side blew away my own expectations. We are in a cyclical business, and this bottom trend has been nasty-longer and lower than most have expected-but I am excited, because this is what I have been waiting for and what will take my net worth to a new level.

    I see no difference in the outcome for yourself, Louis James, and all of those who follow you and survive to the other side. I believe there will be significant upside in gold stocks, especially certain junior gold explorers and developers. Subscribers are in good hands with you and Louis in that regard, and I always read my BIG GOLD and International Speculator when I get the email, regardless of where I am-the most recent being in an airport in Mexico. Keep up the great work, Jeff; even though it's a difficult market, you're doing the right things. It will pay off-maybe not on our desired schedules, but it will pay off.

    Louis James, Chief Metals & Mining Investment Strategist

    Jeff: The junior resource sector tends to progress in cycles. Is the current down cycle about over, or should investors expect the recovery to drag out for several more years?

    L: That's essentially a market-timing question-literally the million-dollar question we all wish we could answer definitively. That's not an option, and I'm sure your readers know better than to listen to anyone who claims to be able to time the market with any precision or reliability.

    That said, I don't want to dodge the question; for what it's worth, Doug Casey and I both feel that gold has likely bottomed. Yes, it's true that I felt that December 2013 was the bottom-but it's also true that most of our stocks are up since then. So, gold may have put in a double bottom, but our stocks outperformed the metal and the market.

    Either way, if we're right, the next big move should be upward, and that's as good for BIG GOLD readers as it is for International Speculator readers.

    I should also add that precious metals are not just "resources"-gold is money, not a regular commodity like pork bellies or corn. It's the world's most tested and trusted means of preserving wealth. So even though resource commodities tend to move as a group in cycles, gold and silver can be expected to act differently during times of crisis.

    And 2015 looks fraught with crises to me… I am cautiously quite bullish for this year.

    Jeff: Where will gold speculators get the biggest bang for their buck in 2015?

    L: If you mean when, statistically the first and fourth quarters of the year tend to be the strongest for gold, making now a good time to buy.

    As to what to buy, it depends on whether you want to maximize potential gains or minimize risk. The most conservative move is to stick with bullion, which is not a speculation at all, but a sort of forex deal in search of safety. For more leverage with the least amount of added risk, there's the best of the larger, more stable producers that you recommend in BIG GOLD. For greater wealth-creation potential, as opposed to wealth preservation, there are the junior stocks I follow in the International Speculator.

    As to where in the world to invest, I'd say it's easier to get in on the ground floor investing in an exploration or development company working in less well-known countries-you always pay more of a premium for North American projects where the rule of law is well established. That's obviously riskier too, but that doesn't mean you have to go to a kleptocratic regime with a history of nationalization. There are stable places off most investors' radars, like Ireland and Scandinavia. Africa plays may be oversold in the wake of the Ebola outbreak, but that story isn't done yet, so even I am waiting before going long there again.

    Terry Coxon, Senior Economist

    Jeff: In spite of profligate money printing over the past six years, there's been minimal inflation. Should we give up on this notion that money printing causes inflation?

    Terry: No, you shouldn't. As Milton Friedman put it, the lags between changes in the money supply and changes in prices are "long and variable." I'm surprised we haven't yet seen the inflationary effects of a better than 60% increase in the M1 money supply. But the Federal Reserve has essentially guaranteed that those effects are coming, since they are committed to keep printing until price inflation shows up. And when it does appear, the delayed effects of all the money creation that has occurred to date will start to take hold. There won't be "just a little" inflation.

    Jeff: What do you watch to tell you the next gold bull market is about to get underway?

    Terry: Beats me. I won't know it is happening until it's already started. But because high inflation rates are already baked in the cake, so is another strong period for gold. That's a reason to own gold now, and the reason is compelling if you believe, as I do, that there's little downside. At this point, given the metal's weak performance since 2011, virtually everyone who lacks a clear understanding of the reason for owning it has already sold. So it's safe to buy.

    10 other analysts were also interviewed, plus Jeff recommended a new stock pick. Tomorrow's BIG GOLD issue has another new stock recommendation-an exciting company that has the biggest high-grade deposit in the world. Now is the time to buy, before gold enters the next bull market! Check it out here.

    Tags: gold
    Feb 02 2:03 PM | Link | Comment!
  • Gold Was Up 73% Last Year!

    Dmitry sipped his coffee drink at his favorite café in Moscow, flipping through the newspaper in front of him. It was full of bad news: currency troubles, ongoing sanctions from the West, rising inflation, and more.

    But he ignored all that. He turned to the investment section and began to scan the page, looking for the latest price of one specific investment. He went past the headline that screamed Russia's inflation rate was up to 11.4% last year, as well as the article detailing the ruble's debilitating 46.5% fall. He knew all those things and had experienced them firsthand.

    He went directly to the page that quoted the price of gold in rubles.

    And there it was. And this time, it wasn't just a short price quote, but a full article on the topic of gold, starting with a headline that warmed his heart.

    "Gold Price in Rubles Rises 73% in 2014"

    The article detailed how gold had soared last year due to the depreciation of the ruble. What especially pleased him was that gold rose more than the ruble fell. It also outpaced the rise in inflation.

    The article included a chart of the last six weeks' price movement, during which the ruble had taken an especially ugly drop.

    Dmitry wasn't surprised to read that it wasn't just the gold price in rubles that was up last year…

    The price of gold rose against ALL currencies in 2014-except the US dollar. Yes, gold was up in the euro, Japanese yen, Swiss franc, Canadian dollar, British pound, Australian dollar, New Zealand dollar, Chinese renminbi, Indian rupee, Swedish krona, Brazilian real, Israeli shekel, and South Korean won.

    Even more interesting was that gold outperformed most stock markets around the world…

    Most investors outside North America not only saw their currency lose value but also lost money in their stock market. His fellow Russians were hit especially hard. Whoever owned gold, though, had avoided these debilitating losses and was actually sitting on a profit.

    The article concluded by congratulating those with the foresight to buy gold, which, unfortunately, didn't include many of his fellow citizens-but it did include him.

    Dmitry has every right to feel pleased with himself. While inflation raged all around him, the currency fell through the floor, and global crises remained escalated, his investment in gold had done exactly what it was supposed to do: protect him against currency and monetary calamity. In fact, he'd gained more with gold than he lost in ruble purchasing power.

    He'd read warnings that this could happen-warnings others had dismissed as the ravings of loony gold bugs. He had been skeptical, frankly, and it hadn't happened exactly as he thought it would, but now he sure was glad he'd decided to play it safe and bought some gold as insurance.

    He wondered what those in North America thought about this phenomenon… Did they see the writing on the global economic wall-or did they imagine they were immune because their stock market had risen so much while gold remained weak in their currency? Did they really believe their central bankers were wizards endowed with supernatural powers others lacked? Didn't they remember Ben Bernanke insisting in 2007 and 2008 that there was no crisis and that everything was under control?

    It seemed to Dmitry that many of them were kidding themselves, because he knew that at some point, the very thing that happened to inflation rates and currency values in his country could happen to theirs. And how gold would respond-as he now knew firsthand.

    Like him, sensible Americans who bought gold while it was on sale wouldn't know the timing but would be prepared for the inevitable outcome of the currency-destroying policies their central bank had adopted, just like all the others. He hoped they saw it coming and envied their chance to take advantage of relatively low prices.

    Dmitry could hardly wait for tomorrow, the day the January BIG GOLD would be released. And it wouldn't be just any issue, but a 50-page blockbuster edition that interviewed 17 experts on precious metals and included two actionable steps to kickstart 2015: a discount on international bullion storage and a new recommended stock, one that Jeff Clark described as a must-own company that came with both safety and high potential. He hopes his friends check it out.

    Jan 05 11:24 AM | Link | Comment!
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