Just watched gold hit
500 an ounce for the first time in how long? A very historic event.
Around 7:30 PM Eastern time on a fine Monday evening, 11-28-2005.
A very, very long time but definitely a time worth waiting for.
Now the graph directly below represents the HISTORIC
evening when gold flew past 500 an ounce. It’s been close
to 20 long years – marking a major LONG TERM TREND.
Now we want you to observe another graph below which
is a week later. And the point we are driving home here is that
gold’s rise to 500 is NOT a short term rally or a short term
phenomenon. As the graph below illustrates gold is determined to
hold this ground & to climb even higher yet.
As the graph illustrates above gold wants to continue
climbing & it will not be held down!
Gold is becoming the premier investment of the 21st
century & investors are quietly & with urgency recognizing
this. Let me drive home a point here as we pummel our way forward
into this new century & new era. Consider the following information
“There will be one billion
handsets a year sold by 2009, with nearly 3 billion mobile users,
says Gartner research.” “Gartner predicts that the handset
sales will break the 1 billion per year barrier in 2009, when it
says there will be 2.6 billion mobiles in use.” “It's
a truly global phenomenon," said Carolina Milanesi, principal
analyst at Gartner for mobile terminals.” http://dailywireless.org/modules.php?name=News&file=article&sid=4416&src=rss10
What we are trying to stress here is that our world
is changing daily by leaps & bounds & the world we knew
& experienced even in the 1990s is long gone.
The communications sector probably dramatizes better than any single
technological advance just how quickly our world is evolving &
changing even as we speak. And this new GLOBAL world of tomorrow
will DEMAND a currency that is both stable & that cannot easily
be manipulated by any one single government or power. The world
has quickly learned from their observance of the United States just
how easily financial currency can be manipulated for the benefit
of just one nation. And as the circle of nations including China
& others continues to grow economically a new & more stable
currency is demanded by all & a currency that will no longer
be easily manipulated for the benefit of just one sole country.
Gold guru Doug Casey also believes gold is reassuming its role as
the world’s principle currency.
“…gold is likely in the foreseeable
future to reassume its traditional role as money worldwide. (And
not just in bullion form, but in modern, safe and reliable bullion
proxies AND ELECTRONIC TRANSACTION SERVICES such as those offered
by goldmoney.com.)” ”I have no doubt that gold will
again regain its traditional role of money, but only after it is
trading at far higher prices than it is today. Wait and see.”
While downtown today I went by to visit the cat that
lives at the book store, Bentleys - purveyor of fine & second
hand books. Zola is the cat’s name. Evidently the store owner
named the cat after a renowned French writer, Emile Zola.
“French novelist and critic, the founder
of the Naturalist movement in literature. Zola redefined Naturalism
I’m bored already.
Sounds appropriate a name for a cat living in a book
store I suppose. The cat is definitely a book worm & not a lap
cat as the animal prefers to spend its time perusing the books rather
than greeting store patrons with a rub. Supposedly Zola allows only
one lap visit a year per privileged visitor.
Zola, “Do I read the books at night? Of
course I do. How did you think I built up all this contempt?”
And the world of nations is awakening to the fact
that only gold can act as that stable & unalterable currency.
This new financial economy is of course centered on eCommerce &
the Internet and we are already seeing gold used more freely via
electronic commerce transactions. Remember our covering the cancellation
by the government of M3 reporting data? The longer we contemplate
this information the more significance we attach to it.
The following interesting & informative M3 info
below is from Bill Murphy’s LeMetropole Newsletter.
“They know what's coming -- massive amounts
of dollar creation (inflation) to fund the worsening trade and federal
government budget deficits," says James Turk in the Free Market
Gold & Money Report.” ”DO THEY SEE A CATASTROPHE
COMING THAT WILL REQUIRE HYPERINFLATION TO BAIL THE U.S. OUT? MAYBE.”
“It doesn't take much to realize that if investors like you
and me don't know the reality of what's happening in the market
and the economy because of deception, we can make some very bad
decisions.” Le Metropole, 11-30-2005
In our opinion this admission to do away with reporting
this important inflation data tells us with a fair amount of certainty
what direction inflation will take in the coming year & beyond
& also, which direction gold will take. Gold authority Paul
van Eeden also adds some very interesting comments on the Fed eliminating
M3 Reporting Data.
“The fact that the Federal Reserve will
discontinue M3 could have more to do with their desire to obscure
real U.S. dollar inflation than the reasons they stated.”
“I FIND IT QUITE INTERESTING THAT THE FEDERAL RESERVE DECIDED
TO STOP PRODUCING M3 FIGURES PRECISELY AT A TIME WHEN M3 SEEMS TO
BE EXPLODING. The average annual increase in M3 during the past
20 years was 5.9%. However, during the past 3 months, M3 has increased
at an annualized rate of over 10%.” Paul van Eeden, 11-28-2005,
As usual Paul hits it right on the nail. This is
very important so let’s repeat again the meat behind what
Paul van Eeden just communicated to us.
“I find it quite interesting that the Federal
Reserve decided to stop producing M3 figures PRECISELY at a time
when M3 seems to be exploding.” Paul van Eeden, 11-28-20005,
Gold veteran John Doody weighs in below on the M3
“Killing another messenger? Fed announced
that as of 3/26/06 will cease
“publication of M3 monetary aggregate”. The broadest
definition of the money
supply, M3 includes cash, checking, money market, plus small/large
Apparently the data will still exist; but like X-rated movies, it’s
too “hot” for
general audience, so the info will be suppressed? SURE LEADS ONE
TO BELIEVE THAT THE FED’S “PRINTING PRESSES” WILL
BE WORKING OVERTIME COVERING US’S TWIN DEFICITS.” John
Doody, Gold Stock Analyst, http://www.goldstockanalyst.com/sample/Dec05.pdf
And now we can begin to see the concern our U.S. government
has towards the issue of inflation. And for our purposes a major
rise in inflation literally guarantees a very much higher gold price
than what we are even witnessing today.
Well, as we ask ourselves how high gold may continue
to climb one of the most determining factors will be to what degree
we see a resurgence in inflation. The Fed would not be eliminating
this M3 inflation reporting data unless it thought inflation was
soon to return with a vengeance. The U.S. Government is ignorant
enough to suppose that if they remove the “barometer”
measuring inflation then just maybe no one will notice. Are folks
complaining about the temperature outside? Well, no problem, simply
do away with the thermometer & no one will be able to know what
temperature it is. And so evidently the government believes that
if they remove the most influential gauge monitoring inflation then
maybe no one will notice inflation creeping silently to the stars.
“David Walker, U.S. Comptroller General
warned that the U.S. would face a “fiscal hurricane.”
He said, “WE FACE A DEMOGRAPHIC TSUNAMI” THAT WILL “NEVER
RECEDE.” The top budget chief explained that ageing baby boomers
will present fiscal challenges as benefits swamp future budgets.
Former Fed Chairman, Paul Volcker warned that America’s deficits
cannot persist forever, “The United States is absorbing 80%
of the net flow of international capital and at some point, both
central banks and private institutions will have their fill of dollars…
SO I THINK WE ARE SKATING ON INCREASINGLY THIN ICE.” “As
such, we believe that gold will at long last reach $510 an ounce
this year and top $700 an ounce next year. However, we believe the
ultimate target will exceed $850 per ounce. IN OUR VIEW, GOLD’S
BULL MARKET HAS ONLY JUST BEGUN.” By John R. Ing, 11-30-2005,
The following commentary below comes from probably
the best overall political/gold analyst from any where & from
“down under”, Bill Buckler. This is no understatement
in describing Bill’s abilities at examination as this fellow
is probably surpassed by no one in his ability to always hit the
nail on the head in as few words as possible.
“The problem for "reality" has
come over the last three months. Over that time, Gold has been rising
against a US Dollar which refuses to fall. The result, of course,
has been an EXPLODING Gold price in terms of the other major global
currencies.” “WHAT IS HAPPENING IS A GRADUALLY INCREASING
UNEASE WHICH IS NOW BECOMING DISTRUST WITH NOT JUST PAPER CURRENCIES,
BUT WITH THE PERVERSE ACTIONS OF PAPER (AND REAL ESTATE) ASSET MARKETS
OVER THE PAST FEW MONTHS.” ’More and more investors,
inside and outside the US, are recognizing the current surges in
the paper markets as being unsustainable. They are buying Gold.
Some of them are looking beyond that and expect that when REAL economic
reality reasserts itself, the carnage on these same markets has
the potential to be severe, to say the least. They are buying more
Gold.” “THE STRAINS AND DISTORTIONS OF THE GLOBAL SYSTEM
HAVE BEEN GROWING EVER SINCE. THEY ARE NOW OF UNPRECEDENTED PROPORTIONS.”
“THAT IS WHY GOLD IS CLIMBING, despite a steady US Dollar,
despite falling oil prices, despite global stock market rallies,
and despite quiescent Treasury yields. Gold is not reacting to things
that are happening in the financial system, it is reacting to things
that more and more people expect to happen to it - soon.”
Bill Buckler, The Privateer, http://www.the-privateer.com/gold6.html
And is anything of consequence outside the world of
money & gold happening in the world? The picture below is of
a homeless person lying in a street in Paris trying to get warm
as pedestrians walk by without one single act of compassion. The
French definitely set a poor example of empathy. I hope it is not
this way here in the town where you live. FRENCH
HOMELESS DYING ON STREETS AS WINTER ARRIVES...
The following below is an important email from a reader
concerning the important, & often forgotten, silver market.
“Gold's fundamentals are excellent and getting
better with each day. It ought to go way up. Granted, however, with
silver actually in shorter supply than gold, and a much wider critical
industry demand, it by all logic, should shoot up much faster. During
the 1849 gold rush when gold was discovered in Australia SILVER
- FOR A TIME - ACTUALLY BECAME MORE VALUABLE THAN GOLD UNTIL THE
COMSTOCK LODE WAS DISCOVERED. Remember, there was no industry demand
for silver then even "remotely" close to what it is today.
Take away the price controls of the SUA and others, you tell me
what the silver to gold price should then be?!”
And below the very well respected & prestigious
Gartman Letter remains very long term bullish on gold.
“Turning then to gold, we'll note for the
record that we are long term bulls. We believe that gold one year
from now shall be demonstrably higher than it is presently.”
“We have maintained, and we shall continue to maintain, that
gold is not being driven higher by trade deficits as the media would
have us believe, for if it were, why then is gold going higher faster
in EUR terms, or in terms of the Yen, or even in terms of the Canadian
dollar, or Aussie dollar, or Brazilian real than it has been in
terms of the US dollar, for those governments are running trade
surpluses. Something other than trade imbalances is driving gold,
and we have maintained for a very long while that IT IS BUYING FROM
WHAT WE HAVE CALLED SECOND AND THIRD TIER CENTRAL BANKS WHO FIND
THEMSELVES LADEN WITH US DOLLAR AND EUR RESERVES AND WISH TO DIVERSIFY
BEYOND THOSE TWO CURRENCY REGIMES. Now we know this to be true,
and indeed THE URGENCY ON THE PART OF CENTRAL BANKS TO DIVERSIFY
IS GROWING APACE. Within the past two weeks we've heard from Russia,
from S. Africa and from Argentina that they are doing precisely
that: diversifying away from US dollar and EUR reserves by buying
gold. Today we note that the official voice of the Chinese Communist
Party, The People's Daily, is reporting that it is wise... even
reasonable.... to EXPECT "ASIAN CENTRAL BANKS" TO FOLLOW
THIS LEAD AND TO DIVERSIFY AWAY FROM DOLLARS AND EUR INTO GOLD.
On that news, gold is back above the psychologically important $500/oz
level. No one should be surprised by that fact. The Dennis Gartman
And even the very respected professional & foremost
precious metals consultancy, GFMS, is expecting continuing higher
gold prices. Read what GFMS has to say below about how high the
gold price will climb.
“LINDSAY WILLIAMS: Philip, this latest gold
price spike is flying in the face of a strong dollar - the dollar
hanging around 1.17 to the euro – so it’s ignoring currency
factors. What do you think is behind it this time?”
“PHILIP NEWMAN: You talk about the currency factors, and I
think for quite a while now it has been ignoring those - if you
go back to when the gold price rally got under way in a significant
fashion back in September 2005 - that’s when we really saw
that relationship start to break down in a serious fashion. Gold
was moving up and the dollar was moving up - I think what that tells
is that WE ARE SEEING A SIGNIFICANT RISE IN INVESTMENT COMING INTO
“…we now have an excellent base for the gold price to
move up.” GFMS, 12-2-2005,
Let’s get back to the title of our article,
“Why Invest in Gold Mining Stocks
WHY INVEST IN GOLD MINING STOCKS TODAY?
Factors pushing the price of gold upward:
• Rising inflation.
• Increased demand from
Asia and the Middle East.
As demand has risen, supply hasn't kept pace.
It can take 10 years and $3 billion to open a small gold smelter
in the USA, Holmes says. But gold-mining stocks, in small amounts,
can actually help your portfolio, Bernstein argues. Gold stocks
rarely move in lockstep with the broad stock market — which
means THEY CAN REDUCE YOUR PORTFOLIO'S VOLATILITY.
“…a portfolio of 10% gold funds and
90% large-company growth funds actually makes smaller moves up and
down than one that's 100% in large-company growth funds. That's
because gold funds sometimes rise when growth funds fall.”
“Gold is the new favorite
of the media. Pick up any newspaper or magazine and there are umpteen
reasons listed in favor of investing in gold.”
“…after a 70% rise in the price of
gold, the INTEREST IN THIS COMMODITY HAS ONLY INCREASED.”
“Then there is a belief
that the long-term bull market for commodities, including gold,
MAY JUST BE TAKING OFF. This view has been underscored by a persistent
rise in the prices of other commodities too.”
“IN OUR VIEW, GOLD IS A "MUST"
IN EVERY PORTFOLIO AS IT BRINGS IN AN ELEMENT OF DIVERSIFICATION.
“The price of gold is driven by factors
which are broadly speaking different from those that drive the price
of other assets such as stocks. This results in what is generally
seen as a contrararian trend. To take an instance, even as stock
markets corrected after the 9/11 terror attacks and the worsening
economic outlook, THE PRICE OF GOLD SPURTED.”
"Sparky used to say there will always be
a market for innocence." http://www.usatoday.com/life/television/news/2005-12-05-charlie-brown-christmas_x.htm
And she brought forth her firstborn son, and
wrapped him in swaddling clothes, and laid him in a manger; because
there was no room for them in the inn. And there were in the same
country shepherds abiding in the field, keeping watch over their
flock by night. And, lo, the angel of the Lord came upon them, and
the glory of the Lord shone round about them: and they were sore
afraid. And the angel said unto them, Fear not: for, behold, I bring
you good tidings of great joy, which shall be to all people. For
unto you is born this day in the city of David a Savior, which is
Christ the Lord. And this shall be a sign unto you; Ye shall find
the babe wrapped in swaddling clothes, lying in a manger. And suddenly
there was with the angel a multitude of the heavenly host praising
God, and saying, Glory to God in the highest, and on earth peace,
good will toward men.
"And that's what Christmas is all
about, Charlie Brown."
There is no other asset class, historically,
other than gold that will make investors more affluent. Gold equities
definitely represent the best longer term investment class today.
Gold Letter provides subscribers a brief review of those gold &
silver companies that are poised to rise dramatically higher as
gold continues its upward trek. For limited time only Life Time
Subscription is available.
To order Gold Letter click the following:
David N. Vaughn
Gold Letter, Inc.
December 7, 2005
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