I have always believed the Federal Reserve and it’s Chairman had other objectives when taking office than simply “stabilizing the business cycle” or “fighting inflation”. As in all Orwellian dramas, the stated objective is usually the polar opposite of it’s nomenclature. This Federal Reserve with it’s current Chairman, Ben Bernanke, is no exception.

Currency manipulation and by proxy then, gold price manipulation are right up Bernanke’s alley. As we all know the price of gold and the strength of the dollar go hand-in-hand…inversely, of course. We all also know the way Bernanke and company print so many US dollars to pay for wars and bailouts…it’s call the US Treasury market.

A quick overview how money is created out of debt in our system…

1. The Treasury needs money so it issues Treasury bonds…or debt which requires a repayment with interest.
2. The buyers of the Treasury bonds, both foreign and domestic, transfer US dollars to the Treasury which deposits these payments.
3. The Treasury is now responsible for repayment of both principal and interest on the bonds issued. It is said this system is the “back-door” to pay the “cost of government” politicians are unwilling to ask the taxpayers for in the form of more taxes. It is the “line of credit” for Congress and a direct addition to the National Debt which now stands at over $10,000,0000,000,000.
4. We will pay back that debt with interest and maintain our standing in the world, but it is becoming increasingly worrisome. The only real solution is to payback all of the interest and principal payments with “devalued” dollars. So, sooner or later we will have to “inflate” the US dollar and some say keep inflating it so our creditors get less and less for buying our Treasuries.
5. This is where Ben Bernanke steps in since the Federal Reserve prints the US dollars, controls the money supply, and by proxy, it’s value. Increase the money supply decrease the value, decrease the money supply, increase the value.

Ben will inflate the currency when necessary and my guess it will be an on-gong endeavor for years to come. Federal Reserve Chairman in the past have at least given lip service to a “strong dollar” policy, but not Mr. Bernanke. He stated in his famous 2002 speech on deflation, a “helicopter drop” of more money could be used if necessary. He became know by detractors as “Helicopter Ben” after that speech.

This is where the price of gold gets a kick. If Ben does what he thinks “needs to be done” a weaker dollar is the result. A weaker US dollar means the price of gold goes through the roof.

James Conrad on SeekingAlpha writes,

“Anyone who reads the written works of our Fed Chairman knows that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of most prior Fed Chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman. He often extols the virtues of former President Franklin Roosevelt’s gold revaluation/dollar devaluation, back in 1934, and credits it with saving the nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934, immediately thereafter. That is something that the Fed wants to see happen again.”

Since Congress can’t seem to steer clear of war expenditures, cease funding every private sector bailout, and eliminate the mentality we can “borrow and spend our way” out of every mess we create…the price increases of gold are baked into the cake.

As James Conrad said in the same December 4, 2008 SeekingAlpha story,

“It won’t matter much if you purchase gold at $750, $800, $850, $900 per ounce, or even much higher. All of these prices will be looking extraordinarily cheap in a few months. The price of our pretty yellow metal is about to explode, and it is probably going to soar, eventually, to levels that not even most gold bugs imagine.”

I think he’s right…so get started today…I’ll help…click the link.

Happy Investing!

I don’t put much sway in what “pundits” say because I know they have an agenda…Jim Cramer taught me that much. However a report out today by Citigroup analysts says gold prices will hit $2,000 an ounce due to the global financial crisis. I find this significant because they see this happening in 2009 and this supports Jim Rogers expectation for gold next year as well.

Unlike Rogers, these analysts credit the rise of the price of gold to the political reaction to the financial crisis which is likely to cause more problems than they solve. The basic assumption is the over-reaction to banking and financial meltdowns is either a hyper-inflation creating “bailout reaction” or a full blown depression should those measures not work as expected…either option improves the price of gold.

The Telegraph reports,

“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist.

“The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

“Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don’t think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes,” he said.

“This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised.”

I am bullish on gold prices for the next year and I’m not leaning on analysts but my own eyes. You should do the same before you invest. However, we all need a dispassionate facilitator to keep our investment goals clear in face of troubled times.

We can help…click on the “Get Started” link to learn more…

Good Luck and Happy Investing!

I ran across this video clip of Peter Schiff, chief of Euro Pacific Capital, who was on CNBC last week arguing there is a gold rally set for a next year….and get this…it will take the gold price all the way to $2,000 an ounce.

I don’t get the financial TV pundits who hate gold. It’s clear to me they hate gold and anyone who dares to defend it as the best asset class to be in right now. The attacks Schiff endures in this interview are unlike any another guess would have to endure. The attitude they take with Schiff is reminiscent of the attitude all the TV political pundits had with Ron Paul…dismissive, condescending, and outright hostile.

I take that back…I Do Get it….these financial TV shows are support by advertisers who sell stocks and bonds….not physical gold. They have to knock any asset class their sponsors don’t have an interest in!

Watch the clip below to see what I mean. If you want to skip just to the talk on gold…it starts about 3/4 of the way through…

Hey, did you catch ..right at the end…he said gold will go to $2000 in 2009….and then he said, “and then go higher”…so $2,000 an ounce is not the end of the rally!

This video is called – “Peter Schiff: The Man Who Called the Collapse” and rightly so. They play a clip from a show in February of 2007 where Schiff was predicting gold to go higher due a economic and financial collapse.

But in tooting my own horn, I called the collapse in the real estate market in the summer of 2005 calling for a liquidation of real estate in January of 2006 and reinvestment in gold…a full year ahead of Schiff! At the time, that was considered crazy-talk too. From January 2006 to the middle of May, gold went from $525 to $725!

Peter Schiff, as good as he is, was not only guy on the planet who could read the writing on the wall!

Happy Investing!

Jim Rogers was interviewed by FT.com’s John Authers in Soul Korea a few days ago and he said some interesting things that those interested in precious metals should know. Rogers is worried about Obama’s pledge to tax capital, the US dollar, and the US housing and financial crisis…just to name a few things.

Jim Rogers interviewed

US Dollar Doomed

When asked about his thoughts on assets classes that will be profitable in this chaotic environment, he said,

“You buy the things that have been unimpaired”

Rogers is talking about commodities….including my favorite commodity…gold when he says “unimpaired”. Companies and their stock values can be hurt by bad management, political meddling, tax policies, and central banker tinkering….commodities can’t.

Commodities markets are very large…global in fact…and central bankers or Wall Street pundits can’t sway commodity prices that are not valid by the fundamentals. Rogers likes this because then the analysis becomes one of supply versus demand…and not a dozen other factors.

When asked when he’d get out of the dollar…he responded with,

“I hope I’m smart enough to recognize when to get out of the dollar because it is a flawed and even a doomed currency”

He goes on to say,

“The US Dollar is finished!”

Wow!

When Rogers says the dollar is doomed or finished….everyone should pay attention. We are in a nice little dollar rally right now (…and the gold price is stagnant because of it), but Roger’s sure this will be temporary and the dollar will return to historic declines. I don’t have to tell you when the world stops seeing the US dollar as a valuable storage currency, gold will skyrocket.

He was asked about whether the dollar weakness would cause politicians and central bankers to return to the gold standard, he said,

“I suspect not…but having said that John, I want to show you I got my own gold…just in case…I’m ahead of the game.”

Rogers then pulls out what appears to be 3, 1 ounce gold coins. The interviewer upon seeing the gold laughs like a giddy school girl taking a ride in a Jaguar for the first time.

Hilarious!

Politicians Will Make Things Worse

When asked about the coming recession he said, “The recession will be the worst since the second wold war”. I agree on the depth of the recession and have written extensively on the meddling of Treasury Secretary Paulson’s attempt to support the real estate market.

Rogers recounts the real estate bubble and mortgage crisis condemning the stated income programs stating it will take years to unravel. On this point I agree it will take years to get the consumers interested in home buying again. Even if demand rebounds, the availability of mortgage money will be suspect since the banking crisis will be in full force then.

Paulson can’t create a housing demand but in the attempt to “help” he’ll cause more harm than good. Rogers believes this as well referring back to improper tinkering with the economy by politicians during the Great Depression stating,

“What should have been a normal recession turned into a depression and it’s happening again.”

Couldn’t have said it better myself…you can watch the full video here.

Good Luck!
Rob K. Blake,
The Gold Insider

I added the live ticker at the bottom so you can track the current silver price on a daily basis. I am not a big fan of over-obsessing on the daily price movements like some delusional day-trader.

So even though you can favorite this page making it easy to return, resist the temptation to check it every day even if you own silver or are thinking of buying silver in the not too distant future.

Obsessive behavior is distructive for investors …for anyone really…and indicates you don’t fully believe in your orginal trade decision or you used money you couldn’t afford to lose. Either way, you made a mistake and “watching it like a hawk” won’t help. Your only solution is liquidate your position and re-think your investment strategy.

I like silver bullion almost as much as golld bullion. I can remember growing up in the 1970′s and seeing my Dad’s silver bars all around the house being used as door stops. Then when Lamar Hunt tried to corner the silver market late in the decade, and the price of silver shoot through the roof, one day I returned home from school to discover all the door stops were missing. Even though we had to find another way to keep our doors open, Christmas that year was fantastic!

If you’d like to learn how to give your family a great Christmas…click over to “Get Started!”…and we can talk about it.

Good Luck!
Rob K. Blake
The Gold Insider

The Gold Insider

Just like in the stock market, there is a “bid-ask” spread when it comes to buying and selling gold bullion or gold coins. If you follow my methods for owning gold, you’ll stay away from the coins since the coins have a premium built into the bid-ask spread…and lately that spread is too great over the bullion. So until that corrects…bullion is a better buy.

Of course, there are those who buy gold in coin form so they can take possession of it…and hide it in their back yard or under their bed…and my guess is those camps are growing…not dwindling. I don’t hold the opinion financial Armageddon is at hand (nor do I want to worry about safe storage of my gold), but I do hold that the recession, the housing bust, and the financial crisis will be a lot worse than expected.

When everyone figures that out…the price of gold will skyrocket. Of course, you need to take a position before it becomes obvious to the world. I can help…click the link, Get Started! today!

Good Luck!
Rob K. Blake
The Gold Insider

Investing options are often so vast and confusing, one opts to make no decision over making the wrong decision. This is one of the many reasons I like and recommend owning precious metals as a necessary addition to everyone’s investment matrix. No one can argue the efficacy of that statement.

It’s unambigous…and truthful.

“Every investor should own precious metals”

A bold statement, no doubt…but one I’ll stand by.

The real question is not should physical precious metals be apart of a diversified investment portfolio, but when to go “heavy” on the metals, which metals, whether to use leverage, among others are the more pertinent questions….and where it gets a little confusing once again.

But the base line question…”Are physical precious metals a good investment for me?”…has been answered.

Why Are Precious Metals a Good Investment?

Over the coming weeks, I will write on all these topics and more but suffice it to say…

Physical Precious Metals are Good Investment because..

Can be a hedge against inflation

Can be a hedge against falling dollar

Can be a hedge against falling real estate values

Can never go to “zero” …has intrinsic value

Can be leveraged for greater rate of return

Can be traded long or short so money can be made regardless of market conditions

Can be a better option if stock, bond, real estate, and other markets are too risky

I could go on and on why owning physical gold (not gold futures or other derivatives…I’m talking about the actual gold bullion) or other precious metal is a fantastic option…especially now in our current global financial crisis.

Thanks for stopping by and stay tuned!

Rob K. Blake