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A majority of analysts polled by Bloomberg turn negative on gold, the first bearish read this...
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Thursday, April 5, 2012, 9:22 AM ETA majority of analysts polled by Bloomberg turn negative on gold, the first bearish read this year. Topping the list of concerns are slumping demand in India - where jewelers have been closed for 3 weeks in protest of higher taxes - and the Fed being a little less eager to paper the planet with greenbacks. Gold +0.8% to $1,627.
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Probably nobody informed them that US has a public federal debt of 15 TRILLIONS $ at the moment (and counting) plus several other TRILLIONS $ at State level plus 55 TRILLIONS $ (estimated) in unfunded liabilities for future pensions and health care and various benefits claims, with annual federal deficits projected around 1.5 TRILLIONS $ for the next several years plus 0.5 TRILLIONS $ trade deficit every year.
China exports are slowing so less need to recycle more dollars into treasuries.
China Imports more oil from Saudia Arabia than USA. Ring ring ring.
How will we sell our debt issuances going forward?
Will the govt force citizens to buy these toxic treasuries?
Projected 2012 deficit $1.3 trillion.
The waters are receding and the sheep are wandering off shore.
For those who fear the consequences of the pyramid of debt in the developed world, gold looks cheap. That's because of the very real threat of deflation. Indeed, were it not for the massive printing of money we would be there already.
It is interesting that few have questioned how it has been possible to print so much money without creating a massive inflation; had this been done at virtually any time in the past the result would have made the inflation of the late '70s and early '80s look mild.
I think the answer lies in the power of the massive deleveraging that is taking place and which is highly deflationary.
If indeed deflation emerges as the real threat, then all debt will become suspect as the falling prices that deflation brings will make existing debt harder and harder to pay off until bankruptcy is the only option.
In such an event, gold will be the only safe haven.
If that were the case, inflation would hardly be such a concern.
Understanding gold and silver miners is more complex. You have to get a handle on the long-term strategy and management.
The fact that everyone is forgetting about gold is a very bullish contrarian indicator. It tells me that when everything falls apart in Spain later this year prices will go shooting higher.
The Fed is buying 60% of the Treasuries issued and just entered into $1 trillion in swaps with Europe yet none of the problems are fixed.
You can see the strains in the financial system.
A second bullish indicator for me was that I ran into no hedge funds or analysts outside of Canada at the recent PDAC in Toronto. That said, analysts from China were all over the place. I could not take two steps without tripping over an Asian analyst trying to be coy about who they were representing.
I anticipate this happening, especially if we continue our current government policies. Thus, I am long GLD, GDX, and GDXJ.