Why Gold Reigns


By David Vaughn
December 19, 2006

As the New Year begins soon both gold and silver will continue to offer investors promising gains for the long term.  There is a lot of pressure now to drive the gold price under 600 as we enter the New Year as evidenced by recent price action, but gold is going to enter the New Year solidly entrenched above 600 dollars an ounce. 

I really wouldn’t sweat these moves down as 2007 will see these moves reversed significantly to the upside.  Now is the time to buy before the New Year begins. The price of uranium is doing exactly as predicted as the price continues to climb higher and higher.

Largest Weekly Spot Uranium Price Jump in History

‘Feeding Frenzy’ Sends Weekly Spot Uranium Price to Record $72/Pound

“For the week ending December 15, the weekly spot uranium price indicator JUMPED BY $7/POUND, OR MORE THAN 10 PERCENT, to $72/pound per pound U3O8.” “Clearly, the spectacular price rally of 2006 will continue into early 2007…” click

Want another reason uranium is becoming more and more important today?

“Electricity defines our civilization. It powers our society and shields us from anarchy. Take that power away, and the thin veneer of civilization begins to erode almost immediately.”  “For now. In the years to come, America's ability to generate enough electricity will be severely tested. Decreasing natural resources, combined with increased demand, is a lousy way to run headlong into your own future. What would you do if the lights went out? How would your life change? (And let me tell you, it would change.)” click

As I have said before I am fascinated by history, but not just the collection of sordid dates and events.  What fascinates me is the “turning page.”  What fascinates me is the ever constant change that is occurring at every moment.  And what intrigues me most is how we usually do not even see this page turning.  Even now the pages are turning but few see.

“Is an end of an era looming in the foreign exchange markets? The dollar has been depreciating against the euro for weeks.”  “The US currency's role as a lead currency isn't as important as it used to be…” click

We are surely always looking at the past and we judge the events of the present in terms of how things used to be.  That is what nostalgia is all about…a yearning for the good ole’ days.  How things used to be not so long ago.  But I have news for you folks as never is time ever standing completely still.  Time is always rushing right by us and bringing with it all kinds of change.  The stars at night appear fixed, but before the night is over every last star has moved to a new location. 

Where I am going with all this?  For the most part everyone today believes we live in a different and unique age with proven financial laws that cannot fail.  This present economic system was only born a little over 30 years ago.  And yes, it appears that the bankers and politicians so far have been able to successfully tweak this financial system to keep it balanced.  But for how long?  If you examine the scales closely today you will notice it is no longer in balance.

“The gradual decline of the dollar in the foreign currency markets in recent weeks could pose a threat to the economy.” “Experts have been predicting for some time that the dollar would eventually go into a nosedive, and now that time seems to have come. The US currency has lost five percent of its value against the euro since late October, and 13 percent since the beginning of the year.” “…Ben Bernanke, the chairman of the US Federal Reserve, has done nothing but look on as the dollar plunges.” click

Just how stable is the world we live in today?  It may be that 1,000 years from now future historians will view the 20th century as a barbarous era still a part of the Middle Ages.  And let’s ask ourselves.  How far have we really progressed the past 2,000 years? In making comparisons of different civilizations I think it very proper to judge the basic civil services that were available for the general population at the time. 

So let’s see how far we have really come in the past couple of thousand years.  Just 60 years ago the following was true in the United States.

“…the 1940s, when almost one-third of the nation's 37.4 million houses had no running water…”  click

And the United States only got its first hotel with an indoor bathroom 177 years ago.  Humbling ain’t it?

“In 1829, the brilliant young architect, 26-year-old Isaiah Rogers, sent ripples of awe throughout the country with his innovative Tremont Hotel in Boston. It was the first hotel to have indoor plumbing…” click

And as you continue to examine our comfortable world today we really do take for granted the fact that all of this really is a fairly new development for us personally.  Makes you wonder about the status of our financial economy as structured anew in the early 1970s.  Our western culture today really is in many ways playing catch up to the far distant past. 

So what do we have today over our ancient ancestors of yesterday?  What do we have that our ancient civilized ancestors did not have?  We drive shiny cars we don’t own and live in big houses we struggle to pay the mortgage on.  Our middle class has unstable jobs and wonder what we will do when this job is transported over seas. And we work 50 hours plus every week just to continue paying on our debt and all.  But at least we probably have more time to enjoy life than our ancient ancestors, huh?  And this is the culture we are still playing catch up to after 1,500 years. 

“Following the fall of the Roman Empire, cities in most of Europe and parts of Asia began to shrink considerably as residents migrated away from the urban centers…”  “The population reduction of the cities resulted in the abandonment of municipal services, e.g., sewer systems, running water. The neglect of these systems contributed to their deterioration.” click

What I am describing here is the world we just exited from 150 years ago.  And you want to trust the present fiat money system here in the US? 
Today, our middle class system is rapidly deteriorating at its center, but 2,000 years ago the Romans had a multiple class system where each class could at least hope of climbing the social scale ladder on to the next level.  That opportunity here is rapidly fading.

“These were five in number (classes), and represented the economic divisions of property- owning or steady – income – earning Roman citizens.”  Fortunes Favorites, Colleen McCullough

What do we have today that is different?  We have a high level of technology that in our ignorance we think makes us superior to previous generations.  Far be it from the truth.  In my opinion western culture is closer to the roots of barbarians than the ancient sophisticated cultures of the past.  In truth as Western Europe descended into the dark ages all culture and academia had already long ago fled farther to the east.  Consider what we dreamily idolize today in our movies and our fascination with castles and moats of the middle age era.  I would rather dwell and think on that part of our past that was highly educated and culturally sophisticated.

And there is not a doubt in my mind that the Asian mind understands this today as they continue to build their mortgage trap encircling the western world.  It is important to remember that the wars of the 21st century will be fought over cultural differences and each culture's mad grab to acquire resources.

Over these ages gold has always retained its value.  Sure, the price of gold has ebbed and flowed over time.  Sometimes worth a little more and sometimes worth a little less.  But never, never in all of recorded civilized history has gold not retained a premium on its value.  Yes, there have been years when gold’s luster shined a little less brightly.  Such was a time between 1980 and 2000.  But mark my words well.  Even during gold’s darker days from 1980 to 2000 the price of gold never collapsed.

“A sea change appears to be taking place on the international financial markets. For years, global capital flowed in only one direction, with $2 billion going into the United States every day.” “This phase seems to have come to an end…” click

So…  Where is gold at today?  Well, that big ole ship at sea is turning.  Maybe the turn is slow but believe me when I tell you that the big ship at sea is turning.  And consider the following text very well and carefully.  Do not judge gold’s future performance by its activity during 1980 to 2000.  This is a new century today and for the next 20 years plus we are going to see a tremendous amount of change and volatility.

But never forget that for the investor it is this act of change and volatility that provides opportunity to accumulate vast wealth.  The future always belongs to the visionary and not to those poor souls still rooted in the soil of yesterday.  In other words don’t judge the future on what has happened in the past 25 years.

Can you do this?  We’ll, how you answer this question may just determine the quality of life your family has in 10 years.  As I have said over and over and over the great bull market of 1980 to 2000 is merely an entry in tomorrow’s future history books. 

"There are fundamental weaknesses in the American economy. This could not continue in the long term," says Alfred Steinherr, chief economist at the German Institute for Economic Research (DIW). Investors worldwide are becoming skeptical and starting to pull their money out of the United States. They have realized that a people and a country cannot live beyond their means in the long term. The US dollar's exchange rate is starting to crumble as a result of this withdrawal.” click

So, to sum everything up I am here to tell you that gold and the resource stocks are the place to be for the foreseeable future.  Gold Letter emails reviews of undervalued gold, silver, uranium and other resource stocks that are under valued. 

Click here to order Gold Letter

Send me an email if you have time to write over the holidays.

David Vaughn
Gold Letter, Inc.


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