Where to Next?


By David Vaughn
June 28, 2006

Why should you be considering gold now even as we have watched a correction?

Have you noticed housing interest rates climbing this past week?  The Fed continues to lose control.  The word is that rates will continue to climb until “inflation” can be contained.  That is a joke.  As if with a flick of a switch the effects of rising energy costs, rising health care costs and every other cost rising can be made to go away with a brush of a magic wand.  Maybe Greenspan accomplished magic in days of long ago, but those days are over and never to return again in our generation.

So I keep saying the same thing over and over again?

Yes, because I have to.  Rising inflation equals a rising gold price.  That is a fact that has proven true since the days of ancient Rome.  And if you read enough you will read in every business section that inflation is becoming more of an issue.  It has been ignored and kept under the table for a long time now.  Yes, I admit that in the past the threat of inflation has been supposedly contained, but this is not the case any longer. 


“Bernanke is raising the rates, but not as fast as the rapidly rising rate of inflation. Therefore gold should (and will) continue to increase in value versus the dollar.”


Even in publications such as USA Today you are seeing further references to the fact that the U.S. dollar is heading lower and inflation is heading higher.  Read John Waggoner’s column in USA Today for last week.  Even the magazine “Money”, generally a giddy publication about how to retire rich by drinking only one cup of coffee in the morning and putting the dollar saved in your mutual fund, is now giving coverage to the fact that a lower U.S. dollar and climbing inflation is a fact its readers have to now accept.

Hello David,

“Gold stocks seem to have held despite the over $100 drop.” “Gold stocks shouldn't suffer much more; but rather tighten up in value/worth during this phase.” “How high?  Gold is certain: as a long-term investment…”



Walking out of the Internet Coffee Shop I grabbed the local Greenville Newspaper off the rack.  The first article that caught my attention on the top of the business section was that U.S. factory orders for big ticket items is continuing to fall.  OK. So what?  The article went on to attribute the blame to rising interest rates and higher energy costs and, yes, even a cooling housing market.

Dear David,

“As evidence of my lack of complaints about your column in general, I am writing to correct your spelling.”    “Note the spelling of the following related words and their usage.”  -  “I don't want to lose all my money investing in gold mining stocks.  If I do, I will want to loose my underfed rabid Doberman pinschers on the gold bugs. But that would be a losing proposition…” “Loosing the dogs on someone is a savage act.  Oh no, the dog got loose and now he's lost.  Note that lose does not contain the letter z yet those who wish that it did somehow comfort themselves by spelling the word with two o's. Also note that your spell checker will not save you from using the wrong verb or word. Thanks for your writings.”


You know…if I can read an article down here in the Deep South about a slowing economy do you think the masses around the country will admit to slowing financial activity? 


“I love you dearly. But, you really must not mar your credibility by incorrect grammar/usage.  It is LOSING (not loosing).” “Thanks for your essays.”


Do you know what I am referring to here?  A trend folks.  I am defining a trend that a local small town southern newspaper can recognize.  So what do folks do when they recognize a trend?  You adjust your financial investments accordingly.  No, I did not say go out and buy an accordion.

Dear David,

“P.S. If I have lost my keys, I am "losing", not "loosing" stuff. Did GATA mistype your letter?”

Burt Green

I am talking about waking up and looking at your pension portfolio and checking to see if you are invested in those shares that will do well in a deteriorating economic environment.  And guess what folks?  What comes to mind as the best long term investment in a failing economy?  Yes, you guessed it.  Gold related investments do best.  So what are you waiting for?  Are you waiting so you can brag about how much money you lost by doing nothing? 


“Here is a much better answer for those who insist that rising interest rates will kill the golden bull.”

Derek K. Van Artsdalen

Derek goes on to share with me an article by the venerable Jim Sinclair-gold guru deluxe.  Jim gives his analysis of what will happen between 2006 and 2011.  Wow!  It doesn’t look pretty as Jim Sinclair projects how this present trend will develop further.  Jim goes on to give us a refresher on the relationship between interest rates, the US dollar, inflation and gold.


“I just returned from a tour of Vietnam - the entire country from North to South.  It's amazing the amount of new infrastructure being built; highways, bridges, port facilities, etc.   On the road from Hanoi to Haiphong, the major port city in the north on the Gulf of Tonkin, there are several entirely new cities being built from the ground up.  They all seem to include a mix of factories, shopping centers, schools and residences.   This is also the case along the central coast near Danang.  In Hanoi and Saigon construction of high rise office buildings and condominium towers is rapidly changing the skylines of both cities.   On the crowded urban roads one sees so many new cars and motorbikes, usually being operated by a very young population.   And no lack of dealerships to supply this demand for private transportation.  With its population in excess of 80 million and with substantial investment by Chinese companies, Vietnam seems a major commercial power in the making”  “Keep up the good work.”


We can’t hear these facts often enough.

Anyway, Jim Sinclair draws a picture of historical facts as these events have occurred before especially back in 1968 to 1980.  During this time interest rates went up and so did the gold price.  And the U.S. dollar headed you know where.  I like how Jim goes on to describe this scenario.  As the interest rates climbed the U.S. dollar literally dropped dead in its tracks.  And we know what gold did.  It went up and up and up.

And we hear that “f” word voiced again by Jim.  Fundamentals, fundamentals, fundamentals, fundamentals.  Yes, keep your eyes on the fundamentals folks and look at the long term trend. 


“I talked my beloved wife into letting me buy bullion of various forms back when gold was around $380 and have been buying ever since.”


And with this growing trend we will continue to see higher interest rates and a higher gold price through the end of this decade.  Big money to be earned for those who can take the blinders off their eyes and understand the opportunities that are lining up today.

Hi Dave,

“Great commentaries. Here's how I see it. Fed raise interest rates...OUCH. Hurt my portfolio some, but look at what’s happened since. Gold took a beating and here it comes again. If interest rates, Feds, and the plans to control inflation "were to put gold in it place", why is it still coming? There's no stopping it, they hit it hard and it got up and is coming again. I agree with you, the fundamentals are there, and unless they change; the price of gold will continue to rise, (with corrections). Yee Haa. As a poor working boy all my life, you don't have to be a genius to see what ever the Gov. does, they usually get the reverse results of what they are trying to achieve.”

Steve Thompson

At the top you read “Where to Next?”  I knew you would ask so the following text is the answer.  I received a message this week from Brien Lundin. 

Brian used to work with the late and great Jim Blanchard.  Mr. Blanchard probably did more positive work for the cause of gold than anyone – period.  Because of the work of James Blanchard we won our right to own physical gold again.  Anyway, Brien carries on this work and the greatest legacy he continues that was started by James Blanchard is a big investment conference held in New Orleans every year.

Remember I scolded you for not going to Vancouver the first week of June?

Well, now you have a chance to redeem yourself.  And maybe have a good time also.
Steve Forbes and Newt Gingrich will be there.  You really can potentially get a return on your money by attending these shows.  You sure will not learn anything by remaining home sitting in front of your TV and watching the evening news. 

Why am I now pushing these various gold and assorted investment conferences?  Well, for one there is so much activity in this market now there are not enough analysts to get a lot of these new stories out.  So, if I could sum up in one word the advantage in attending these shows I would do so in 2 words.

Stock tips.

As I have said earlier there just is not another industry sector that has these types of promotional events that allow for the small investor to meet with and socialize with the movers and shakers in this resource and gold bull market.  It’s your loss if you choose to ignore these opportunities.

Anyway, send Brien an email and let him know you’re coming.  He’s a real nice fellow and he doesn’t bite.  As I say again…  Get out and meet these people.  Bring your wife and kids.  Heck, bring the family dog.  Check with your CPA and see if the trip is tax deductible.  The show is in the middle of November and filling up fast so you need to get your name down pretty quick to reserve a spot.

And let me mention probably the most important reason for attending this particular New Orleans Conference.

By attending in New Orleans this fall it will be a good way of showing tribute and support to the survivors of Hurricane Katrina this past year.  New Orleans is still in the process of rebuilding and the dollars injected in their local economy will go far in helping the people of New Orleans.  Anyway, let’s all get together this fall and participate and go.  It will be fun.  And maybe even tax deductible.

When I finished writing this it was late evening and the sun was just dropping below the mountains.  I rent a place right on a golf course in a valley surrounded by low lying mountains.  Gold [golf] balls are always landing in the yard driven so far away I cannot see the driver.  I always suppose Gerald Ford is playing this course every week as I find so many golf balls in the back yard. 

It’s a great walk around the course at this time of day.  There are several ponds in the middle of the course and there are groupings of trees every where along the course.  As small as these ponds are there are huge carp, bass, catfish and brim in these waters.  You noticed I said at the beginning that I am presently renting. 

I do believe personally that housing will eventually bottom to such a degree that there will be great buys as so many home owners discover they owe more than they could ever sell their house for.  Nathan Rothschild was reputed to have said it is always best to buy when the blood is running in the streets.  And there will definitely be blood in the streets soon for those who are not prepared.


“The Feds endlessly throw in dollars as fuel for the furnace and turn up the thermostat a quarter percent interest hike at a time so it stays warm and toasty. China, Japan, and a few others stock pile fuel for the furnace so they can stay nice and warm too. Strange they don't realize that the thermometer was stuck on 68 the whole time. The feds increase the fuel flow into the furnace and the fire is getting way too hot. Melting from the inside out, the damage can't be seen at first, but can't be ignored either. Gold may melt a bit when the fire gets too close, but it's still gold. When the furnace finally cools pick up the ashes and show me what value is left. Let the timid investors run from the corrections while I keep the gold. Only in America!”

R&M Fletcher.

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Let me hear from you. 

I particularly want to hear from you world travelers and what you have personally witnessed that corresponds with what I talk about as far as the world changing and all.  Thanks!  I especially want to hear from you if you have been to any where in Asia recently.  Write me.

David Vaughn
Gold Letter, Inc.


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