An avowed Keynesian, Equities and Economics Report writer Victor Gonçalves braces against the economic gale-force headwinds that threaten to whip gold's stellar run into seasonal weakness. But, before the new year, the yellow metal will generally see more strength than weakness, according to Victor, after which "things really get sour." In this exclusive interview with The Gold Report, Victor says he's rooting for the juniors in the homestretch, affirming: "This is the best part about juniors—we're in results season."

The Gold Report: Victor, you and many others were expecting a major pullback in the market and we had some pullback in late October. Is that what you anticipated?

“Words from the Wise” this week comes to you in a shortened format as I am about to leave Cape Town for a visit to the colder environs of Switzerland and Slovenia. Although reduced commentary is provided, a full dose of excerpts from interesting news items and quotes from market commentators is included. Blog posting will be slow (and totally absent on some days) while I am on the road. The normal blogging service will be resumed on my return to Cape Town on November 16.

The Federal Open Market Committee (FOMC) maintained its extraordinarily accommodative monetary policy following its meeting on Wednesday. The communiqué had no surprises and said that the committee expected to keep the fed funds rate target in the 0-0.25% range “for an extended period”. As expected, the European Central Bank (ECB) and the Bank of England (BoE) also kept interest rates unchanged at 1% and 0.5% respectively.

When surveying the financial and economic landscape of November 2009, it isn't that hard to get "the big picture". It seems to me that the manipulations and the activities of the "Smart Money", a.k.a the Exchange Insiders, the Specialists and their array of big banking clientele makes it abundantly clear that they want the stock market and precious metals market to remain in "bubble mode" for awhile longer. There are many opinion and myths about it all floating around. This concerns me.

Alfred Goldman, the wise old sage of the former brokerage firm called A.G. Edwards and Sons had a saying that I always liked: "It's not the snake you see that bites you, it's the snake you don't see." He wanted to warn customers that we can easily become distracted by all the noise, all the "talking heads" and myriad opinions and miss what is really going on.

“I think stocks are topping out, commodities are topping out and the dollar is making a bottom,” says Robert Prechter, president of Elliott Wave International and author of “Conquer the Crash“.

According to Yahoo Finance - Tech Ticker, Prechter also makes the seemingly counterintuitive argument that the dollar will rally because there’s so much debt, rather than being doomed because of it.

Josh Lipton points out:

The American Enterprise Institute for Public Policy Research (AEI) published a paper indicating that “by all relevant debt indicators, the US fiscal scenario will soon approximate the economic scenario for countries on the verge of a sovereign debt default.”

Gold

Gold dipped slightly overnight but found support at $1,084/oz in the early hours of yesterday morning. It has since recovered and is currently trading at $1,090 /oz. In EUR and GBP terms gold is trading at €735/oz and £659/oz respectively. The US Federal Reserve has signaled that a return to higher interest rates will not be based solely on economic recovery, but dependant also on an increase in inflation and a recovery in the employment market. They remain committed to keeping interest rates “extremely low for an extended period of time”. Meanwhile all eyes and ears will be focused on the Bank of England’s Monetary Policy Committee meeting announcement today as well as the ECB rate setting announcement and subsequent press conference. Although no changes in interest rates are expected the rhetoric will be keenly analysed for any signals of their future intentions.

Q3 2009 Earnings Call

November 5, 2009 1:00 PM ET

3Q09 (Qtr End 9/30/09) Earnings Call Transcript

November 05, 2009 10:00 ET

I argued the bull case for gold in my posts over the past few months (see “Gold bullion - regaining its shine?“, “Gold bullion glitters bright” and “Gold bullion - challenging $1,000“. With the gold price scaling fresh peaks and closing in on $1,100, it would certainly seem as if renewed interest in the yellow metal is being stirred up, especially subsequent to the purchase by India’s central bank of 200 metric tons of gold from the International Monetary Fund.

As printing presses are running at full speed to produce ever-increasing quantities of fiat money as governments engineer the greatest asset price reflation in human history - and the U.S. greenback is heading South - the longer-term fundamental case for the yellow metal is arguably positive.

The Reserve Bank of India in an off market transaction purchased 200 Metric Tonnes of Gold Bullion from the International Monetary Fund (IMF). Several things made this both interesting and market moving.

First, the magnitude of the purchase was surprising. Second was that they were not expected to make the purchase at all, analysts expected a large buy from China and the rest sold in market to the regular IMF Affiliate Banks. Lastly, they paid for it not in SDR’s or Special Drawing Rights as is the common practice when dealing with the IMF but in Hard Currency.

On October 07 The Gold Report conducted an interview with me just after gold broke out to new news above $1030. During that interview I made the case for $1300 gold by spring next year and advocated to be invested in high quality juniors which are poised for a multi year bull run that could even surprise the staunchest junior investors. This piece is an update on that interview and shines a light on how to approach investing in junior gold mining shares.

Many people - including former analyst for the U.S. Treasury Richard Cook - argue that credit is too important a function to be left to the private banks.

Indeed, even after taxpayers have given trillions in bailouts, backstops, guarantees, and other gifts, the giant banks are still not lending out much credit to individuals or small businesses.

Equity Futures: Dow -9.00. S&P -1.30. NASDAQ -5.75. Japanese Nikkei -2.00. German Dax -15.00.

European Trade: The regional European indexes lost an average 0.50% in Thursday morning trade, reflecting the market’s uncertainty ahead of important interest rate decisions, coming from the Bank of England and from the European Central Bank. In addition, the sell-off seen during the last few minutes of the U.S. cash session had a negative contribution to the global equity markets, sending both Asian and European shares lower.

Don’t get me wrong. I love silver. As a very long term investment, you cannot find anything better. If you ignore short and medium term volatility, and simply hold your metal for a long term of years, you will probably do okay. The world is running out of silver. The painful part of this "buy and hold" strategy, however, is in watching prices get periodically clobbered.

Another strategy is to keep a “core” long term portfolio, while, at the same time, keeping a non-core or speculative portfolio. In the speculative portfolio you attempt to profit by buying and selling on the price swings. In both cases, you will buy on the lows, but, instead of just holding for years, you buy low and sell high on a regular basis.

Precious Metals ETF have gone wild the past 2 weeks. Last week we saw gold and silver prices drop sharply as it shook out short term trader’s stop orders before breaking out and moving higher. Also there is a disconnect between the gold and the dollar.

Energy commodities like natural gas and crude oil are moving in opposite directions and look to be picking up speed. Natural gas is losing pressure and oil is on fire.