The Fed didn't do much of anything yesterday. But for those who read between the lines, another round of quantitative easing seems all but assured.
And that means a major rally in gold is on the way. If past form holds true, this would translate to gains measured in hundreds of percent for top junior resource stocks.
Dear Fellow Investor,
Things are bad. We think they’re going to get worse. But just in case we’re wrong, we’re not going to do anything about it just yet.
That about sums up the Fed’s views on the state of the economy and their propensity to act, at least yesterday. The important thing is that their failure to do more than the widely-expected extension of Operation Twist immediately sent gold tumbling as much as $28 immediately following yesterday’s release of the Federal Open Market Committee’s policy statement.
But once investors had time to review the simultaneous release of the board members’ economic projections, things changed quickly.
In a nutshell, those projections showed lowered expectations for GDP and employment -- a depressing outlook that indicates we’re on the verge of additional QE.
Just as important, the Fed members also lowered their expectations for inflation, which gives Bernanke & Co. great latitude for further moves by easing fears that additional money printing would lead to an inflation problem.
This led investors right back into gold, and the resulting wave of buying -- and probably short-covering as those who had just sold the market were almost immediately forced to cover -- allowed gold to make up all that it had lost. From that point, however, gold drifted back down, ending up off by about $10.
Busting Down The Door
The bottom line is that not only did the Fed leave the door open for another round of quantitative easing, the combination of the committee’s forecasts and Chairman Bernanke’s subsequent press conference lead the market to believe they have one figurative foot through the door.
And they’re about to bust it down.
Opinions may vary, but Bernanke seemed almost apologetic for not having acted yesterday. Although Richmond Fed president Jeffrey Lacker remains a hawk on monetary policy, having dissented as expected from yesterday's decision to extend Operation Twist, the rest of the voting committee now seems much more dovish than previously thought.
It won't take much more evidence of a slowdown, particularly on the employment front, to push them to action. Just as I predicted that the May employment report would push the Fed to the edge of QE3, I think that the June report will send them over the cliff.
In short, the odds for additional QE have only been enhanced by yesterday's developments. And that, in turn, means much higher prices ahead for gold, silver and mining stocks.
The senior gold stocks have been relatively strong in recent trading sessions, particularly in relation to gold itself. The smart money is moving into gold stocks, and it’s only a matter of time until this filters down into the high-potential juniors that we follow.
I think we’re going to have a typical year for gold and gold stocks -- a mid-summer bottom followed by a rollicking bull run in the fall.
The record shows that the best way to profit from these moves is to attend our annual New Orleans Investment Conference. You’ll see information on that above.
My Gold Newsletter readers are already well positioned for this next big rally in gold. One of the top stocks that I’ve recommended to them is Kaminak Gold (KAM.V; $1.84).
Simply put, Kaminak is engaging in one of the most ambitious drilling programs in the junior exploration sector, as exemplified by the latest results from Coffee, the company’s flagship gold project in the Yukon.
Begun in March, this campaign has already completed 20,000 meters of drilling to expand and connect the known areas of mineralization at Coffee and to probe untested gold-in-soil anomalies. The company is on schedule to drill 50,000 meters of RC and diamond holes on various targets on the property.
The strong results already seen from this project last year, combined with the aggressive nature of the 2012 drilling program at Coffee, suggest that the company’s early-2013 resource estimate for the project could wow the market. Four drills are currently turning at Coffee and another drill should begin to turn soon at Sugar, another target within Kaminak’s large property position in the area.
I think that Kaminak could be bought out -- at a very significant premium to today’s levels -- before that resource estimate is announced. It’s one of my top recommendations for both safety and profit potential. It’s a strong buy near current levels.
In closing, let me stress that this is no time to be sitting still. There are huge opportunities in front of us right now, but they won’t last long.
So sign up for New Orleans 2012 while you still can...and buy Kaminak Gold and other top junior resource stocks at today’s bargain prices.
Yours in enduring wealth,
President and CEO, The New Orleans Investment Conference
Publisher and Editor, Gold Newsletter
P.S. Be sure to click on this link to learn more about New Orleans 2012. Because I’m so confident you’ll make big profits from your experience, I’m offering a quadruple-your-money guarantee! Click on the link above for the details....
Brien Lundin is the editor and publisher of Gold Newsletter, a publication that has ranked among the world's leading precious metals and resource stock advisories since 1971. To learn more about Gold Newsletter, visit www.goldnewsletter.com. Mr. Lundin is also the host of the famed New Orleans Investment Conference, the world's oldest and most respected gold investment event. To learn more, visit www.neworleansconference.com.