Tuesday, January 1, 2008

Happy New Year !

As the calender rolls from 2007 to 2008, one wonders if what we have just witnessed over the last half of 2007 was the "end of the beginning", and as 2008 dawns, will we bear witness to the "beginning of the end"? The "end" of what you ask? The end of "our way of life"...the end of "buy now pay later", ...the end of "livin' large", ...the end of the "American Empire".

The US Fed and US Treasury have finally been exposed as the fraud that they are, the "Great Monetary Swindle" they unleashed upon the globe in 1971 has come full circle to bite the hand that feeds. The US Dollar is now only months away from a permanent home in the dustbin of history as Gold, like a phoenix, begins it's ascent to regain it's rightful place upon the monetary throne. Gold, the Truthsayer, now invites investors from across the globe to protect their wealth and profit from the demise of the US Dollar by investing in the "cold hard truth of Gold".

Gold – What’s Driving It Higher?
By: Julian D. W. Phillips, Gold/Silver Forecaster

There is no doubt that during 2007 the gold market has evolved from one suffering persistent undermining attack by global monetary authorities over the last 25 years [through sales and accelerated supply] began to fade noticeably, as the credibility of its replacement, the U.S. $ began to decay visibly, to one that garnered a new respect, if only amongst both private and fund investors. And by funds, we are not referring to the short-term speculators but to long-term holders, primarily of gold Exchange Traded Fund shares. It is primarily Investor demand that will drive the demand for gold in 2008 because of the enviable position it holds, which we describe below.

Add to the above the meteoric rise of the oil price and we saw gold beginning to act as a counter for dropping confidence in the monetary system attracting more investment demand.

More than a confidence crisis!
“Many $ holders, including central banks and sovereign wealth funds as well as private investors, clearly want to diversify into other currencies. Since foreign $ holdings total at least $20,000 billion, even a modest realization of these desires could produce a free fall of the U.S. currency and huge disruptions to markets and the world economy. Fears of such an outcome have risen sharply in both official circles and the markets.

However, none of the countries into whose currencies the diversification would take place want to receive these inflows. The Eurozone, the UK, Canada, and Australia among others believe that their exchange rates are already substantially overvalued. But China and most of the other Asian countries continue to intervene heavily to keep their currencies from rising significantly. Hence, further large shifts out of the $ could indeed push the floating currencies far above their equilibrium levels, generating new imbalances and a possibly severe slowdown in global growth.”

This is the atmosphere that has driven investment demand for gold and in turn the gold price. We expect that in the year ahead, this climate will deteriorate substantially driving investment demand to new record levels. But let’s be clear about this, we are not talking of a simple rising of investment demand, we believe we will see a large acceleration in that demand taking it well through four figures in tonnage terms as well as in price terms.

At each stage of its growth it will attract bigger players as the liquidity of these shares gives comfort to the larger players. Indeed, the total holdings of such funds are already equal to the holding of the top echelon of Central Bank holdings, even above that of China having moved into the equivalent of seventh place and likely to move into sixth place next year ahead of Switzerland.

We have said in the past that a level of 3,000 tonnes holdings by the gold E.T.F.’s is possible and will attract the biggest players. At the time many thought it was far fetched, but as total holdings by such funds [including the Canadian equivalent] crosses the 860 tonne level, such forecasts are proving more than credible.

Bear in mind that the huge financial power of the Mutual / Pension etc funds is now able to invest almost directly in gold [via these shares]. This buying power was just not present before the creation of the gold E.T.F.’s. Each day this demand grows as new gold Investors come into this market and there is a massive amount out there still to come in. Funds before the Exchange Traded Fund concept were just not permitted to hold gold. The nearest they could come to that was to own gold shares with all their inherent risks. Now that investing power is unleashed needing only the education that gold in share form is now available to them. It is this power that is becoming the main driving force behind the rise in gold.

Clearly then it is investment demand that will soon be, if not already, driving the price of Gold higher. Couple that will a falling Gold supply, the rising cost of Oil, an imminent implosion of the entire bond market, runaway inflation, geopolitical unrest, and drought...and we have all the fuel we need to ride Gold to the Moon...perhaps even beyond.

According to John Williams of Shadow Government Statistics $850 gold in 1980 is now equivalent to over $4,000. People! Gold is still cheap! But it won't be cheap forever. Golds breakout from it's Pennant Formation [discussed here Dec 13, 2007] at 807 has Gold on the fast track to $963. It is possible that we could see Gold reach this level by the middle of February. It is notable too that Silver closed December at a new monthly high of 14.77, and is on the verge of breaking a large ascending triangle on the monthly chart that projects to an interim high of $19.98. Silver is colossally cheap relative to Gold. There is roughly 16 times as much Silver in the World as their is Gold. Back of the napkin math then reveals that at today's "nominal" price of Gold at $835, Silver should be selling for ---- $52 an ounce. If Gold were at $4000, then Silver, using the same math, would be at $250! Silver IS the Investment Of A Lifetime. BUY BOTH NOW WHILE SUPPLIES LAST.

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