The Gold Rush Has Just Begun
September 12, 2011
Few people understood the real reasons why gold rocketed higher
over the past few weeks.
And even fewer understand why — despite the correction — this
is just the beginning of gold’s historic bull run.
In this issue of Golden Opportunities:
Why far higher gold prices are locked in...and six specific stocks
you need to buy right now to multiply those gains.
By Brien Lundin
“The United States can pay any debt it has because we can always print money
to do that,” former Fed Chairman Alan Greenspan recently noted on Meet the Press.
Greenspan was referring, of course, to the stunning downgrade of U.S. sovereign debt by Standard & Poors, and the idea that the United States could ever default on its debts.
The “Maestro”was right, of course. How can you default when you can just print up more money at will?
But S&P was also right — albeit for the wrong reasons.
I’ll explain what I mean in a moment. But first, let’s consider the stakes involved here:
You might have noticed that S&P’s impudence in downgrading the U.S. debt earned them harsh criticism from the Obama administration and its supporters.
It also earned them an investigation by the Obama Justice Department.
In short, you’ve got to be very careful what you say these days...or be willing to accept the consequences.
So what I’m about to reveal to you may send some jack-booted thugs knocking on my front door. But it’s too important for me to stay quiet.
You see, we’re facing a crucial period in our nation’s history, a time when our wealth and our way of life is at greater risk than at any time since the Great Depression.
With just a few simple steps, you can not only protect yourself from the coming financial onslaught, but actually make a fortune from the events that unfold.
Do nothing...ignore the facts I’m about to deliver...and you’ll risk losing it all.
Now, let me tell you why...
S&P Was RIGHT
To Downgrade The U.S.
When Greenspan said the U.S. can always print whatever money it needed, it was one of the rare times this master of obfuscation actually said what he meant.
Here’s what Greenspan knows better than most: The question isn’t whether the U.S. can pay its debts...but what the dollar will be worth when it does pay.
Consider that, despite the fact that the dollar remained fairly firm against other world currencies throughout the debt ceiling debacle and the S&P downgrade, the greenback slipped considerably in value against gold, its true barometer of value.
The reason? Because investors and savers around the world know that America’s mountain of debt is absolutely unsustainable. And there is no political will to make the fundamental changes necessary to eliminate it.
Even if there was, there’s no way to cut spending or raise taxes enough to overcome the crushing debt load. The only way out is the time-tested avenue of inflation.
Make the dollar cheaper, and you also cheapen the value of the debt.
So, even though Standard & Poors never mentioned it in their analysis, the real reason to downgrade U.S. debt is not because it won’t be paid off...but rather that it will be paid off with much cheaper dollars.
The Crisis Is World-Wide
The dollar isn’t alone in its predicament. The European debt crisis has been enough, all by itself, to send the world scurrying for the safety of gold.
Many are drawing parallels to 2008, where we also saw the effects of a massive credit crunch. But there are important differences this time around. And these differences harken back not as much to 2008 as to 1978.
For example, in 2008 we saw the dangerous potential for cascading bank failures leading to a failure of the global financial system and a slip into a depression. The banks had to be bailed out by a massive injection of liquidity into the monetary system.
Today, we see the potential for a more frightening scenario: the cascading failures of nations.
In 2008, the banks were bailed out. Today, nations are being bailed out. The difference is not only of kind, but also of degree. It will take much, much greater liquidity to bail out Italy, Spain, Portugal...and the U.S.
This is why the spikes higher in gold during the 2008 crisis were also accompanied by sharp drops, as margin calls in other assets forced speculators to sell their gold for the cash needed to settle up with the margin clerks.
Today, gold isn’t a piggy bank to rob in times of crisis; it’s the tool to provide safety and profit during the turmoil.
Because, as uncertain as today’s investing environment may be, there is one long-term certainty: It’s going to take a lot more money to bail out nations today than it took to bail out banks in 2008.
Thus, the current situation may be more analogous to 1978. Two years into the Carter presidency, it was patently obvious that the guy had no clue as to how the real world worked, and his administration’s Keynesian schemes to juice economic growth through money-pumping were being exposed as futile and ineffective.
Still, while it’s obvious that the current administration is equally ignorant of free-market operations and their Keynesian experiments have also failed, there are differences between today and 1978.
We haven’t seen the price-inflation results of this period’s monetary inflation, but smart investors know the effects are coming. (They also know that inflation is being measured by a longer yardstick today.)
Thanks to Jimmy Carter, investors today also know the financial damage that can be done after two years of an incompetent presidency is nothing compared to what can be done in four years.
So, today’s flight to the safety of gold is not due so much to what is happening now, as to fears of what will happen over the months to come.
As readers of Gold Newsletter know, I believe the recent correction in gold was necessary, healthy...and temporary.
I also firmly believe that we have at least 14 months left in this gold bull market, or until around the 2012 elections. If, however, Obama regains the presidency and Democrats retain control of the Senate, then all bets are off. The next four years would be very bad for the fiscal health of our nation, albeit very good for gold prices.
Instead of Carter’s 1970s, the analogy would shift to FDR’s 1930s.
In view of either scenario, I continue to recommend the steady accumulation of gold and silver. I advise you to do it on a dollar-cost-averaging basis, buying the same dollar amount each month, with an effort to concentrate your purchases during periodic price dips.
As prudent investors, we must consider the dangers of the latter scenario, wherein the Obama administration retains the White House and, in its last term, unleashes its collectivist tendencies without the restraint of an impending election.
Frankly, I don’t see this scenario, and the worst dangers it would entail, as being very likely at this point. But it is still something that smart investors will insure against by buying their gold and silver in small denominations, from a number of dealers, and keeping quiet about it.
I don’t think that gold confiscation is a very likely danger in this day and age. But I’m sure that citizens in 1933 didn’t consider it very likely in their day and age either.
Of course, gold and silver mining/exploration stocks didn’t benefit much from the recent big spike in gold, because investors were buying for safety, and not betting on returns. Thus, the summertime “buying season” that seemed to be ending has not only been extended, but the sales have gone to the clearance rack.
Granted, it takes courage to buy when blood is in the streets, and there is likely going to be more blood shed in the days to come. But this is where the big profits are made. Gold Newsletter readers will remember that I recommended Millrock Resources at six cents a share in November 2008; it subsequently traded for well over a dollar a share.
I expect similar profits to be created from the current crisis. However, I caution you against rushing into the market in pell-mell fashion; these are very volatile times, and we could still see a liquidity vacuum that leads to a sell-off in gold as well.
With that said, here are some of the most attractive bargains that I see right now, in alphabetical order:
• Bankers Petroleum (BNK.TO; C$4.67). We want to buy real value in this environment, and Bankers has a huge dose of it in its Patos-Marinza oilfield in Albania. We also want to buy the reality that oil prices will not remain at current levels over the long term.
• Copper Fox Minerals (CUU.V; C$1.65). Again, it’s a reality. As in one of the world’s largest undeveloped copper-gold-moly deposits. And it’s on sale.
• Full Metal Minerals (FMM.V; C$0.39). A world-class copper discovery now being drilled, a top-level exploration team with an exceptional property portfolio, and news on the way.
• Inter-Citic Minerals (ICI.TO; C$1.30). Millions of ounces of gold, in China, with a $6.3 million exploration program underway. It’s a value that must be recognized at some point.
• Kaminak Gold (KAM.V; C$4.20). In an extraordinary example of unfortunate timing, this company announced some outstanding drill results from the Supremo T3 Zone on its Coffee property in the Yukon on the very day that gold dropped $100! So it didn’t trade upward on the news...and is now trading at a considerable discount to the levels I expect over the longer term.
• Millrock Resources (MRO.V; C$0.52). Like 2008, another opportunity to pick up this outstanding exploration outfit at a bargain level. But the company is light years more advanced than in 2008, with news on the way on some high-profile drill programs.
The stocks above have already been recommended in Gold Newsletter and the Gold Newsletter Alert Service, much to the benefit of those readers. These companies are still outstanding opportunities, however, and that is why I’m recommending them now to our valued Golden Opportunities readers.
Your Best Investment
Opportunity Of The Year
I fully expect the stocks above to be big winners as gold and the rest of the metals complex resumes their bull market run over the weeks and months ahead.
But here’s something else that I know for sure: In volatile times like these, the best investment you can make is in your education...
...And I’ve pulled out all the stops to bring you the top picks and strategies of the world’s most successful experts for this year’s New Orleans Conference.
You can register immediately by CLICKING HERE. Or, give us a call on our toll-free line
(800-648-8411) to learn more, to register...or to get more information.
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