Failed Fed Policies Prolong The Agony
By Ron Paul - Daily Paul
The Federal Reserve's interest rate price-setting board, the FOMC, met last week. They will continue to set the federal funds rate at well below 1%, and plan to keep it low until the end of 2014. That's a year and half longer than they planned when they met just last month. Chairman Bernanke says they are keeping interest rates so low for so long because the economic outlook warrants it.

The fallacies in their reasoning would be amusing if they weren't so dangerous. The Fed wants to keep the price of money at essentially zero – in other words "free" – to boost the economy. But the boost they are attempting won't get here for another three years. That's not a recovery. And we've already tried this tactic. That's how we got into this mess in the first place: with interest rates artificially low for a very long time. Free money doesn't stimulate growth, as Japan's two lost decades clearly show. Artificially low interest rates only serve to punish saving, distort market signals, and cause further malinvestment. They also do nothing to address the only real solution to our economic woes: liquidation of the bad debt that hangs around the neck of the world's economy, preventing recovery. Artificially low interest rates merely ensure that we remain a debt-financed consumer economy guaranteed to end up with a weaker economy and higher prices.

What baffles me even more is that two decades after the collapse of Soviet planning and decades more since the U.S. and economists purportedly rejected the idea of price setting, we find nothing wrong with the Fed setting the price of money. We all agree it is a bad idea to have a board saying the price of wheat should be $250 a ton today, or carpenters wages should be $25 an hour until the end of 2014. But we are perfectly comfortable with having a board set the price of one half of every transaction in our economy. And our markets are supposedly free.

The Fed policies of low interest rates, Operation Twist, and rounds of quantitative easing are all attempts to keep the economy alive artificially. But the 12 FOMC participants cannot manage the economy any better than the bureaucrats of the Soviet Union. The policies haven't worked. They won't work. Real economic recovery cannot come until we liquidate the bad debt, until we eradicate the poor decisions we made over the last decade, and start with a sound foundation. It is time we acknowledge the truth of the Fed's activities: they are merely using fancy words for price setting.

Treasury Secretary Andrew Mellon was correct in the 1920s when he said "liquidate everything." That's what we did in the severe depression of 1920-21, and we recovered so quickly it is never even talked about. We didn't take his advice after the 1929 crash, and ended up with the Great Depression. We are committing the same mistakes, destined to live in this Great Recession for a decade or more—it has already been four years, the Fed says it will be at least three more! It's time we start rethinking what the Fed's policies are really doing to our economy, because obviously, by their own admission, they haven't helped.

Gold Is The Hottest Currency In The World
Forbes - Robert Lenzner, Forbes Staff
The price of gold is roaring back from its latest temporary correction, sending the bears into full withdrawal. If you sold your gold in December as it fell to $1525 an ounce, you’re probably feeling foolish at the incredible $210 rise to $1735– a 15% move in no time at all.

Gold, you see, is not a commodity like oil and copper and wheat. It is rather an alternative currency– one that finds buyers when paper currencies like the Euro are being hugely increased in supply by the ECB to forestall a sovereign cum bank crisis in Europe. There’s $650 billion in European bank and sovereign debt coming die before March 31, 2012 which can be sopped up by the $650 billion gift from ECB to the banks at the bargain rate of 1%. And more available from the European central bank– Europe’s very own Quantitative Easing program.

As the supply of gold cannot keep up with paper money(supply increases very little despite exploration), and it can be bought without loss of any real interest income, it seems clear t hat the gold bull market is alive and well. Central banks obviously are of the mind that gold’s rise will make up for t he decline in paper money and the lack of income on central bank liquid investments.

Then, too, the speculators already dumped 42% of their long positions between August and December, 2011 according to the High-Tech Strategist, a January 5, 2012 market letter by Fred Hickey that I strongly recommend. Hedge funds sold to meet redemptions. Hot money ran at warnings by technicians.

The truth is that the drop to $1525 in December triggered the renewed buying by the Chinese, who are the new incremental buyers in the world. The Chinese prefer to buy on weakness and not compete with the central banks of Russia, Korea, Thailand,Singapore and are buying to hold.

Zhang Jianhua, the research bureau director of the People’s Bank of China, was quoted in the POBC internal newspaper as insisting that “The Chinese government needs to further optimize China’s foreign exchange asset portfolioi and seek relatively low entry points to buy gold assets.”

Gold, apparently, is the Chinese priority for a “safe haven” when slow economic growth leads to widespread monetary easing and fears of ultimate inflation. Gold more than stocks or bonds or real estate, is obviously seen as the preferred way to store wealth. In that sense the Chinese are way ahead of the US and Europe.

After all its moves in 2011 gold was still up about 11%– more than stocks any place, and only beaten by 10 year US treasuries. Treasuries at 2% aren’t viewed as a reserve currency. Gold is the hottest currency in the world. Just ask the Chinese.

Turk - Gold Ready to Smash Through $2,000, Exploding Higher
Today James Turk told King World News that gold is very close to beginning a move that will take the ‘Metal of King’ smashing through the $2,000 level. Turk was even more outspoken on where silver is headed and included a chart. Turk, who was interviewed out of Spain, had this to say about where gold and silver are headed in coming weeks: “The logical question here, Eric, is after the big week we had last week, will silver drop back to give buyers one more chance to buy the dip? A dip is logical given silver’s 6.5% gain last week. On the other hand, as we noted in the last blog we did, sometimes the dips can be very shallow.”

“The important point to keep in mind is while silver may look high compared to where it started the month, to me silver looks cheap compared to its upside potential over the next few months. So don’t wait for a big pullback to buy. If today is the day where you purchase silver each month, go ahead and make the buy. Don’t try to time the market.

This following weekly silver chart is really looking very powerful and as I have been saying, once silver hurdles above $35, I expect to see $68-$70 in 2-to-3 months.



Note how the downtrend line, the $35 resistance level and the current silver price are getting ready to meet. Silver's first attempt to hurdle $35 could happen within the next 2-to-3 weeks....

“There is, of course, no guarantee that silver will successfully hurdle $35 on its first attempt, but we need to get ready just in case it does. By ‘get ready,’ I mean we have to prepare ourselves mentally - to eliminate the emotion and watch what silver is telling us. This can be very hard to do, but it is essential. Otherwise you will miss the big moves, and it is riding these big moves to the fullest extent possible, from start to finish, where the big money is made.

Regarding gold, I don’t think people realize that gold could explode from current levels. I think the potential for explosion is there and what you are going to see is not only silver on the move, but you will also see gold smash through the $2,000 level.”

When asked what’s happening in Europe, Turk responded, “It looks like Greece is ready to blow up, Eric. The Greeks have rejected German-led calls for the EU to start managing Greek government finances. That would mean the complete loss of Greek sovereignty, so the Greek finance minister obviously rejected that dictate.

Consequently, it looks like Greece is not going to get its next bailout, meaning it will default. But there’s a lot of other bad news in Europe as well. Spain is in a depression with its youth unemployment rate now over 50%. France just raised the VAT (Value Added Tax) to 21%. Imagine, Eric, paying 21% to the government for everything you purchase.

This is why the underground economy is so large and growing in Europe because people need to survive. Across the channel, the UK is sliding into what looks like a deep recession.

To make things even worse, on the other side of the Atlantic, the Federal Reserve announced they are going to destroy savers by keeping interest rates below the inflation rate for another two years. It is really tragic, Eric, how governments are destroying capitalism, but as Ludwig von Mises warned us, governments will destroy free markets and economic activity long before they understand how they work.”

Von Greyerz - Gold Market Positioned for Massive Upside Move
Today Egon von Greyerz told King World News that central bank balance sheets are expanding at a dangerous rate and this is a recipe for an explosion in gold and silver prices. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Here is what von Greyerz had to say about central bank activity and how it will impact gold and silver prices: “I’ve been looking at the explosion of the balance sheets of the central banks and it’s just astonishing to see how much money they are printing and how their balance sheets are expanding. We have the absolute perfect recipe for hyperinflation and thus a massive increase in the price of gold and silver.”

When asked about the action in gold and silver, von Greyerz responded, “The move in gold, so far, looks extremely good. I’m always pleased that we don’t have a straight move up, although I do think we will have faster moves higher in the not too distant future. This is strong action with small corrections.

We are at $1,730 today and I think within the next couple of months we will certainly be touching $1,900 and continuing higher from there. I don’t think $1,900 will be a stopping point for very long.

I really like the action of silver. Silver still hasn’t broken out like gold has, but as I said to you last time, I expect that to happen soon. It will break out around the $37 level. That’s going to happen very quickly because the gold/silver ratio is moving down nicely, but I think it will soon accelerate lower and silver will move a lot faster to the upside than gold.

So I can see $37 being taken out within the next 30 days and then we will just start flying from there. It won’t take long to get up to $50 again.”

Gold Will Double In 5 Years
by Henry Blodget Daily Ticker
Gold is off its recent highs, but Frank Holmes of US Global Investors says the bull trend is very much intact.

Gold is actually a seasonal investment, says Holmes. In the first sixth months of the year, investors focus on the "fear" trade--the hope that gold will insulate investors from carnage in other assets (or the fear that investing in gold will clobber them).

In the second half of the year, however, investors begin to focus on the "love" trade--the season in which people around the world start thinking of giving the metal as gifts (in the shape of jewelry). The love trade, says Holmes, should drive gold higher by the end of the year.

And the long term?

Gold prices could double in five years, says Holmes. The supply of paper money is exploding, while the supply of gold itself is growing quite modestly. So when you project out those trends, the outlook for gold as investment is still promising.

And Holmes just one of those gold bulls who only like gold because of some religious devotion to it --or because it's going up?

No way, says Holmes! The fundamentals really do suggest that gold prices will pretty much only go up.

In A Weak Moment..... I Voted
Shocked and amazed at how well anti-establishment Ron Paul has been doing this election season, I determined that I would vote in the SC Republican Primary last week as I felt I finally had a choice and was not being forced to vote for the lesser of two evils. But, as the election results rolled in, I was quickly brought back to the reality of how our system really works.

Seems I forgot that even if the people finally wise up and think for themselves rather than falling for all the media hype, the powers-that-be still have the final sayso in the outcome. Reading the following article reminded me of this truth that I zealously overlooked on my way to the polls last Saturday.

"The clues are clear but only to the alert observers. In year 2000, for the first time a gross inconsistency showed itself as an anomaly. The exit polls in Florida and Ohio did not match the election results at the local level. For a full generation, the correlation had been over 90%, as it should be, since people exiting a voting center reveal their votes with consistency. This is the left hand and the right hand coinciding genetically with the same human standing before the clipboard recording the exit poll. The lapdog subservient US press reported the anomaly as people changing their minds, or not admitting to the clipboard their actual voting preference. Numerous statistical studies showed the anomalies in colored form, to expose Florida and Ohio for its voting system fraud. Yet another blatant fraud has infected the American landscape. This is a far cry from legions of dead people rallying to vote for Kennedy in Chicago during the 1960 election, with the forces marshalled by Mayor Daley. History has repeated, as 1000 dead people voted in the South Carolina primary in one city alone. My guess is the dead people voted for Gingrich.

The season started in Iowa, where Ron Paul had a nice steady lead for the few weeks leading into the caucus. Then suddenly Santorum came out of nowhere to share the win with Romney. Paul finished a lowly third. The Santorum crowds were small except for his victory speech. Could it be that the outsourced vote count took 10% to 12% of the Paul vote and put it in the Santorum bin? Then in New Hampshire, where vote fraud is much more difficult due to hand counted ballots, a reality check came. Santorum finished way down the line. Move on to South Carolina, where again Ron Paul shared the lead position in the polls. But on the primary day, again Paul finished again a lowly third. We are told Gingrich won, and justified by having his home state so nearby. Yet Gingrich had to cancel a couple campaign stops due to lack of attendance. Ooops! Could it be that the outsourced vote count took 10% to 12% of the Paul vote and put it in the Gingrich bin?"

Source

India to pay gold instead of dollars for Iranian oil. Oil and gold markets stunned
DEBKAfile Exclusive Report January 23, 2012, 5:57 PM (GMT+02:00)

India is the first buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, debkafile's intelligence and Iranian sources report exclusively. Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran's total exports of 2.5 million bpd. Both are superpowers in terms of gold assets.

By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran's oil exports.

The vast sums involved in these transactions are expected, furthermore, to boost the price of gold and depress the value of the dollar on world markets.

Iran's second largest customer after China, India purchases around $12 billion a year's worth of Iranian crude, or about 12 percent of its consumption. Delhi is to execute its transactions, according to our sources, through two state-owned banks: the Calcutta-based UCO Bank, whose board of directors is made up of Indian government and Reserve Bank of India representatives; and Halk Bankasi (Peoples Bank), Turkey's seventh largest bank which is owned by the government.

An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept dark.

India thus joins China in opting out of the US-led European sanctions against Iran's international oil and financial business. Turkey announced publicly last week that it would not adhere to any sanctions against Iran's nuclear program unless they were imposed by the United Nations Security Council.

The EU decision of Monday banned the signing of new oil contracts with Iran at once, while phasing out existing transactions by July 1, 2012, when the European embargo, like the measure enforced by the United States, becomes total. The European foreign ministers also approved a freeze on the assets of the Central Bank of Iran which handles all the country's oil transactions.

However, the damage those sanctions cause the Iranian economy will be substantially cushioned by the oil deals to be channeled through Turkish and Indian state banks. China for its part has declared its opposition to sanctions against Iran.

debkafile's intelligence sources disclose that Tehran has set up alternative financial mechanisms with China and Russia for getting paid for its oil in currencies other than US dollars. Both Beijing and Moscow are keeping the workings of those mechanisms top secret.

'The World Does Not Need to End'
A Gold Bull and His Prediction: $10,000 an Ounce
Wall Street Journal Online

There are gold bulls. And then there is Shayne McGuire.

The 44-year-old pension-fund manager from Texas, who spoke recently at a gold conference in Berlin, caused a stir among the roomful of gold aficionados. His provocation: A book that predicts the price of the precious metal could soar to $10,000 an ounce, more than seven times its current price.

Like those who once boldly predicted $1,000 Internet stocks and a 36000 Dow Jones Industrial Average, Mr. McGuire is a lone voice among mainstream investors suggesting such an outsize price jump in gold's price.

Mr. McGuire's view isn't idle prognostication. He runs a $330 million gold portfolio at the Teacher Retirement System of Texas. Mr. McGuire's forecast, which he made in the recently released book, "Hard Money," makes him a very far outlier. Most on Wall Street consider the prediction outlandish.

"If you missed" gold's recent run-up "you have to come up with some pretty sophisticated reasons to buy" now, says Andy Smith, metals analyst with Bache Commodities, a unit of Prudential Financial Inc.

Mr. McGuire was early to the gold trade. In 2007, he and a colleague persuaded the $100 billion Texas fund, the nation's eighth largest, to move into the metal. It was a novel strategy that made it one of the few large U.S. pension funds to have a fund solely devoted to gold.

At the time, gold was trading at around $650, less than half its current price.

In his 2007 pitch, Mr. McGuire argued that gold was "the most underowned major asset, widely seen as an eccentric, anachronistic leftover from the pre-information age that is best for 'end of world' types."

Not everyone at the Texas fund felt the same way. In one meeting, a pension executive sarcastically asked if anyone else in the room thought "the world was going to end?"

Indeed, most pension funds still steer clear of gold, investing just a fraction of 1% on average of their assets in the yellow metal, according to Alan Kosan, of Rogerscasey, an investment-consulting firm. Most pension funds consider gold too volatile and therefore too risky.

So far, however, Mr. McGuire is in the money. With gold prices surging this year, his fund is up about 25% since its inception a year ago. For its fiscal year ended in June, the Texas pension fund was up 15.6% overall. The gold fund has half its assets invested in a gold exchange-traded fund, SPDR Gold Trust, and the rest invested in gold stocks.

Gold's historic run-up was spurred by uncertainty about currencies, fears of inflation and continued monetary easing by the Federal Reserve. Like dot-com stocks in that bubble, which were difficult to value because many companies generated no earnings, gold is hard to value because it produces no earnings or revenue and costs money to store.

"It doesn't do anything but cost you charges and stare at you," billionaire investor Warren Buffett said in a recent interview.

There are other gold bulls, of course, including prominent hedge-fund manager John Paulson, who has predicted gold could go to $4,000 an ounce by as early as 2013.

For his part, Mr. McGuire says gold is no longer only for those who think financial Armageddon is near. He expects gold to soar amid rising inflation, among other things. "The world does not need to end for gold to go hyperbolic," he says.

In his book, Mr. McGuire reasons that $10,000 gold is possible if enough other pension funds and big investors jump-start buying and move as little as 1% of total global stocks and bonds holdings into the metal. Such a migration into gold would equal enough demand to push prices up tenfold from their current level, he calculates.

Of course, the same argument would be true for nearly every other investment class. Mr. McGuire has confidence in his argument, however, because he believes inflation will return, which typically pushes gold prices higher.

He said he expects a series of fiscal crises to hit around the world. And then there is China, where he says that gold is "widely regarded as a basic savings asset."

Gold prices also are rising because of the ascendancy of exchange-traded funds, which are funds that track an index but are be traded like a stock. The largest ETF, under the trading symbol GLD, now invests $50 billion, an amount that Mr. McGuire believes could grow far higher if investors shift a small percentage of their investment funds into gold. At its current level, the stock-market capitalization of all gold ETFs is about $80 billion, roughly that of McDonald's Corp.

"Now that the value of modern money is becoming highly questionable, more and more people are turning to gold. It's not the new thing; it's a return to normal," he says.

The son of a foreign correspondent for Newsweek, Mr. McGuire grew up in Mexico and spends leisure time playing chess and reading history books.

He is a fan of the financial history of the 1930s, and quotes from Franklin Delano Roosevelt's first inaugural speech in 1933 about the importance of not overspending. Before joining the Texas pension fund in 2001, he was an analyst at Deutsche Bank and ING Barings.

His gold prediction is by far the most aggressive call he has made in his career, he says, but he says he ignores his doubters. "It seems like an aggressive call," Mr. McGuire says, "but it's really a comment on what governments have been doing to the monetary system."

Of course, the risks of such a big prediction can affect one's entire career, much as it did former stock analyst Henry Blodget, whose bullish call on Amazon.com was lambasted after shares plunged in the dot-com bust. "There are enough nutty-sounding gold targets out there that this one probably won't shock anyone," Mr. Blodget wrote in an email. "But it's certainly a nice big headline-friendly number."

Libya Was All About Gold
[Futuremoneytrends.com] James Rickards is Senior Managing Director at Tangent Capital Partners LLC, a merchant bank based in New York City, and is Senior Managing Director for Market Intelligence at Omnis, Inc, a technical, professional and scientific consulting firm located in McLean, VA.

During this interview with Mr. Rickards, he discusses the next global financial crisis and how the average person should take steps to protect themselves. Mr. Rickards, who also has been an adviser to the Defense Department and the intelligence community, gave us his outlook for Iran, Ron Paul, occupy Wall Street, the tea party, and how we could potentially be approaching total financial chaos.



If you cannot watch the above video, click HERE.

Ben Davies - Funds Will Pile into Gold after Missing the Rally
With gold closing the week at the $1,665 level and silver at $32, today King World News interviewed Ben Davies, CEO of Hinde Capital, to get his take on where the gold & silver markets are headed. When asked what he is focused on right now, Davies remarked, “We’re looking at this year being a year of sovereign defaults. That’s where I’m focused and from that I have to try to derive what asset classes are going to do. I think of the monetary system, at the moment, as a coin. There are flip sides of the coin and one side is credit, deleveraging or deflation as I call it.”

“On the other side we’ve got monetary inflation, and those two are trying to counter-balance each other to try and keep the coin spinning, in the middle, keeping upright. It wavers one way, risk assets go off into credit deleveraging. It flips the other way, markets surge again.

To enlighten on that is to go back to what happened in December. I was very clear from my trip to Asia and the way I’ve perceived positioning in the market, that it was more likely we were going to have a post Christmas or certainly a December deleveraging.

For me, watching the actual physical gold market, although the gold/silver ratio pushed out a little bit, I really felt the selling was all about gold, and silver was just a side participant. Watching the market, it was one seller. I’m not going to name names, but I suspect it was a very large fund that’s had a very bad year. Everyone knows who it is (Paulson)....

“His gate was up for allowing redemptions and I suspect there were significant redemptions. So there was selling of the GLD, or certainly there was selling in other parts of the gold market, in order to unwind the collapse in his own fund.

So one seller in the market was pretty rigorous for the space of a week. It was very obvious based on the sentiment indices we look at, these were some of the best risk/reward sentiment levels that we’ve ever seen. Probably the best seen since the 2008 level, and actually I would say they were arguably better in silver.

If I would have been an investor I’d probably have taken more risk in silver, which is what we did. We bought some call spreads, in the market, to add to our long silver position. We got long, actually, on the very last day of the year when the market gave us our buy signals. The market, as of yet, hasn’t told us to be out and so we are still over-invested in the market.

In terms of calling for prices, I think we had a great call (last year). We called for a $400 or $500 rally in the market. We got it, almost to the $2,000 level that we asked for.

My only criticism of myself is I hung on to the belief that despite the central bank intervention in the market, I thought with all of the currency proliferation it would be enough to offset the deleveraging and spur gold to a nominal new high. That didn’t happen.

I would say that (with gold) coming in $1,570 at the start of the year, you would have to believe the market had more upside. But people aren’t really invested and the market is rising on this monetary asset growth. It’s really inflation that’s driving this, underpinning the market.

The danger here is that people (who especially run funds) feel they are missing this rally and they start to pile in. I would say I’m looking for the $1,700 - $1,720 level before I’d even think about reducing.”

In this interview Davies covered gold, silver, the mining shares and what fundamentals are driving assets in 2012. The KWN audio interview with Ben Davies will be available shortly and you can listen to it by CLICKING HERE.

John Embry - Gold to Rapidly Triple in Price on This Move
[KingWorldNew-Blog] With gold holding on to gains above the $1,650 level, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management, to get his take on where he sees gold headed from here. Embry informed KWN that gold was very close a major breakaway move to the upside. Here is what Embry had to say about the situation: “I’ve been of the mind for a considerable period of time that the gold price really wouldn’t accelerate to the upside until such time as the physical market finally overwhelmed the paper market. But I think we’re reaching the stage now where there is mounting buying of physical because people are starting to realize the paper price is fraudulent.”

“We’re very close now to that important moment where the physical market actually does overwhelm the paper market, and as this takes place you will see massive moves in the price of gold. I will finally be convinced the physical market has gained ascendancy when the gold price is going up 4% or 5% a day or $100. That’s going to happen.

The ‘London Trader’ is right when he says there is a lagging effect from the physical purchases which is later reflected in the price. In the end, the Achilles heel of the paper manipulators is they have to be able to get enough physical gold to handle demand. So, I agree with the London Trader there is a delayed reaction.

I’ve had this discussion with a friend of mine, who was very active in the gold market of the 1970s, and he witnessed the London Gold Pool supplying as much gold as was necessary to keep the price suppressed. But at some point the entities working the London Gold Pool realized they only had a finite amount of gold. Even though they hate gold, they realized they couldn’t sell it all....

“I think we’re getting to that point once again, and that will be the inflection point that will kick off the physical explosion in the price. I’ve been surprised the suppression has gone on as long as it has. The gold has been coming out of the Western vaults through leasing, but I believe that has a very finite life now.

The minute this thing gets away and we start to have a real market and prices start to reflect real supply/demand, it will bring in a lot more demand at the same time supply is being diminished. This is why you’re going to have price moves of staggering dimensions.

What we are seeing, to date, is just the beginning because the market has been rigged the whole way up. But the fact is gold has risen from $250 to as high as $1,925 and that just reflects the power of the fundamentals. We haven’t seen the market break away from the rigging, which it will, and that’s when the huge moves will happen.

The technician I have the utmost respect for is Alf Fields. When I was at a conference in Australia, last November, Alf told me he believed gold had bottomed and would not break $1,500. He has now stated the bottom is in and his next major target is $4,500 on gold. That’s roughly a triple off the lows. That, alone, would kind of support the idea the physical market is going to gain ascendancy.

We will have $100+ up-days in gold. Right now it’s hard to believe, but we are going to see moves that will be staggering to market participants. You could see moves, to the upside, of hundreds of dollars in a day. When you say that, you almost lose people because they cannot conceive of that type of action yet.

If you contrast where we are versus the 70s, we are probably in the ’74 to ’76 time frame. So the big move in gold is still ahead of us. This time the moves will be greater because there is less physical gold available and conditions are infinitely worse. That’s where people get those numbers for gold like $10,000 and I could certainly see something like that happening.”

Half of U.S. Households Received Government Benefits in 2010
from Yahoo Finance
A record-high 49% of the population lived in a household receiving some type of government benefit in the second quarter of 2010, according to Census data reported by The Wall Street Journal. Most of this group received so-called "means tested" benefits like food stamps, subsidized housing or Medicaid. Many are also benefiting from unemployment insurance spending, which has quadrupled since the downturn.

Is this statistic a watershed mark of our decline into socialism, a totally reasonable outcome from the Great Recession, or, somehow, both things at the same time?

Click here to read the rest of the story.

Cash Is Trash



Robert Kiyosaki is author of Rich Dad, Poor Dad and is known world-wide as an investor, author, businessman and motivational speaker.

What would it take to burst gold’s price?
igoldprice.net
No one ever said gold was an asset for the faint-hearted. Or indeed, for anyone who doesn’t enjoy an argument.

To some it is the only true form of money, a king over the water just waiting to be re-installed on its rightful throne once the impostors are cleared out of the way. To others, it remains, as the economist John Maynard Keynes described it, a “barbarous relic,” of no more relevance to the 21st century that the canal or the telegraph.

Still, even by its usual standards, it was more contested than ever as 2011 closed out. After running all the way up to $1,916 an ounce in the autumn it dropped all the way back to $1,550 as the year ended. So has the great gold bull market, which started in earnest all the way back in 2000, finally blown out?

Not quite. Gold will tip over into bubble territory one day. But it won’t move into a bear market until central bankers start hammering down on inflation as they did in the early 1980s. And that moment is still some way off.

True, it is not hard to make a bear case for gold.

Any asset that has been rising fast for more than a decade has to treated with suspicion. Back in July 1999, gold hit a 20-year low of $252.80 an ounce. The International Monetary Fund was a seller, and so were central banks in Australia and Britain. It looked as if time was finally being called on its role as the ultimate repository of value. As it turned out, that was the bottom of the market. Since then the price has climbed and climbed. Even give the correction before Christmas, gold is up six-fold in a little over a decade, while stocks and most other assets have gone nowhere.

That bull market has entered the popular consciousness. Ordinary people who hardly follow the markets, and have no idea what bond or currency markets are doing, now discuss gold in much the same way they used to discuss property prices. There are endless adverts offering great prices for unwanted jewelry. Gold funds pitched at ordinary investors are being launched all the time, and the bullion companies are building new vaults to store all the stuff. It even trends on Google.

If that isn’t a sell signal, it is hard to know what is. On top of that, some of the smartest players in the markets have jumped off the bandwagon. George Soros, the hedge-fund guru, has said he has sold most of his gold holdings. Like him or not, Soros is always worth listening to: he’s been right more often than most of us, and has the bank balance to prove it.

Against that, the bull case is not hard to make either. Inflation is still a threat. Central banks are still minting money. The dollar is in steady decline as the world’s reserve currency. Perhaps most importantly, the euro remains in crisis. Either the European Central Bank will print lots of money — which is good for gold — or else the currency will collapse chaotically — which would be good for gold as well. Little surprise then that the bulls are sticking to their forecast of the price soaring past $2,000 an ounce during the course of this year.

Who should you believe? One useful way of cutting through this argument is to ask this question. What it would actually take to drive the price of gold down?

We have one major example to look at. Between 1980 and 1982, the price of gold collapsed from more than $840 an ounce to less than $320.

Why did that happen? Well, because there was a sustained rise in interest rates. In the U.S. interest rates went from 11% in 1979 to 20% in 1980. In the U.K. rates went up to 16% in 1980. Even in that haven of low inflation and monetary stability, the old Bundesbank-controlled West Germany, rates went all the way up to 11.5%. Gold peaked at roughly the same time, but then went into a sustained decline.

The reason for that is not hard to understand. Rising interest rates do two things to gold.

First, they reduce inflation — and since gold is primarily a hedge against inflation, that reduces its value. Once the central banks have made it clear they are going to raise rates to whatever level is necessary to bring prices under control again, there is not much reason to protect yourself from inflation. You are better off moving into other assets — such as stocks, for example — that will flourish as the economy becomes more stable. Investors don’t catch on immediately, but they get the message soon enough.

Second, as interest rates rise, it becomes more expensive to own gold. The precious metal pays no interest. Indeed, you have to pay to store it. When interest rates are zero, as they are now, that doesn’t make much difference — cash doesn’t pay any significant interest either. But when interest rates rise, the cost of holding gold, in the sense of interest foregone, starts to rise. Back in 1980, you could get 20% on cash, so all that gold sitting in your portfolio looked expensive.

The point is a simple one. The gold price is not going to fall in any sustained way until interest rates start to rise significantly. Perhaps they don’t need to go back to 1980s levels because they are starting from a lower base. But interest rates of 10% would be necessary to create a bear market in gold.

Is there any sign of that? Not yet. If anything, central banks are going to make money even cheaper this year.

The precious metal will turn into a bubble one day — every asset eventually does. But it is a long way off that point now.

Author: Matthew Lynn is a financial journalist based in London. He is the author of “Bust: Greece, the Euro and the Sovereign Debt Crisis,” and he writes adventure thrillers under the name Matt Lynn.

Point Of No Return
The following commentary and chart are from and article entitled 2012 - The Year Of Living Dangerously.

The world is awash in debt. Everyone is focused on the PIIGS with their debt to GDP ratios exceeding the Rogoff & Reinhart’s 90% point of no return. But, the supposedly fiscally responsible countries like Germany, France, U.K., and the U.S. have already breached the 90% level. Japan is off the charts, with debt exceeding 200% of GDP. These figures are just for the official government debt. If countries were required to report their debt like a corporation, their unfunded entitlement promises to future generations are four to six times more than their official government debt.



Any critical thinking person can look at the chart above and realize that creating more debt out of thin air to solve a debt problem is foolish, dangerous, and self serving to only bankers and politicians. The debt crisis took decades of terrible choices and bogus promises to produce. The world is now in the midst of a debt driven catastrophe. At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression. The largest banks in Europe are leveraged 40 to 1, therefore a 3% reduction in their capital will cause bankruptcy. Once you pass 90% debt to GDP, your fate is sealed.

The US Economic Situation Simplified
(Or, why it is unwise to store your savings in paper money)
Source: Norman Willis, Nazarene Israel

Why the US credit rating was downgraded...
• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000

Let's remove 8 zeros and pretend it's a household budget:
• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385

$10,000 Gold is Coming in 2012/13! Here’s Why
Source: munKNEE.com
I am increasingly confident that the consequences of fragile sovereign debt, precious metals market manipulation, insufficient physical supply, and the need for a safe haven investment refuge, will contribute to rampant price inflation and drive precious metals bullion and mining stock to a parabolic peak price of $10,000 sometime in 2012 or 2013 at the latest. You may think my views are crazy or perhaps that my imagination is way out of hand or, at best, that I don’t have access to the appropriate reality checks but the reality of the situation is that we are going to see $10,000 gold in the next year (or two)! Read on for what I believe to be very sound reasons for coming to such a conclusion. Words: 1102

So says Arnold Bock (www.FinancialArticleSummariesToday.com) in an updated version of an article written back in 2010 in which the passage of time has only strengthened his assertion. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Bock goes on to say:

Below is my assessment of the situation and rationale for my not so outlandish forecast/prediction:

THE CAUSES

1. History is No Guide
Gold has only been trading freely since President Nixon’s 1971 decision to deny gold to the French and others attempting to repatriate their paper dollars for the metal. As such, there has been a scant forty years of gold production and trading since it was detached from supporting paper money. This period has also been marked by substantially higher monetary and price inflation as well as currency devaluation.

2. Market Manipulation
The Commodity Futures Trading Commission (CFTC) held a major hearing in 2010 which blew the doors off bullion metals futures trading markets in terms of what was revealed publically. I predict this public hearing will be viewed in the period ahead as the precious metals price liberation event of the decade.

More recently, Eric Sprott has pointed out in an article entitled Sprott: Shocking Shenanigans in Paper vs. Physical Silver Market that the annual production of physical silver is traded in the futures markets in a space of one to three days. That means the virtually all the trading in the futures markets is about trading phantom paper supported by absolutely nothing. I ask, is this make sense? Is it a valid method of establishing the price of the real precious metals?

It is commonly known that JP Morgan Chase in the major player in commodities futures markets trading. Not only do they take massive naked short positions (betting that prices will fall), they do it with large substantial leverage. What isn’t as well known though is that Chase acts as the agent for the Federal Reserve Board and other central banks in ‘managing’ the precious metals markets on their behalf. Central banks want ‘orderly’ precious metals markets and prices and currencies which don’t gyrate wildly. Only then can they achieve stealth inflation through financial repression in their monetary policy which is so beneficial in servicing debt.

3. Insufficient Physical Inventories
While it is normal for traders to roll their expiring contracts over into new paper trades, most traders accept cash in settlement rather than the metal. At hearing of the CFTC in 2010 Jeff Christian inadvertently confirmed that there is little bullion in storage at the London Metals Exchange or New York’s COMEX to back the metals trading. (See a previous article I wrote entitled Where’s the Gold!?) justifying this fact by noting that less than one ounce of one hundred traded is paid out in physical metal. This revelation confirmed a much worse reality than even critics, such as the Gold Anti-Trust Action Committee (GATA), had expected. It seems too that the Asian and Mid East buyers and owners of bullion have been removing gold from their dealers’ vaults and are taking it “home” thus leaving much less than previously thought in the London, New York and Toronto vaults.

In addition to what looks like a production peak in the gold mining industry (production has fallen in 5 of the last 8 years), central banks have for the first time recently become net purchasers (having bought more gold last year– 425 tons – than at any time since 1964).

The single largest purchasers of metal these days, other than central banks, are the bullion ETF’s (Exchange Traded Funds) which ostensibly have their metal inventories in vaults. These relatively new investment vehicles, unfortunately, are not transparent in their business practices. Regular audits by reputable accounting firms and allocated and segregated bullion inventories stored in reputable vaults are opaque at best. This begs the question:“Do the large ETF bullion funds actually have the metal they purport to own, or is their inventory more the ‘paper gold’ variety in which bullion futures trading exchanges specialize?”

THE EFFECT
1. The revelation, outlined above, that there is insufficient physical inventory to meet new investment demand for ownership and delivery of physical bullion, is about to blow the price lid skyward.
2.As public awareness of sovereign debt mounts, it will drive home the reality of mounting government insolvency.
3.Confidence in paper currencies will wilt commensurately.
4.Investment demand for gold as real money as a safe haven investment will expand exponentially.
5.These events began in 2011, should accelerate in 2012 and extend further out toward 2015 before demand is satiated.
6.Dramatic price increases in gold and silver will at that point be encouraged by the unstated desire of central banks and politicians to devalue their currencies in order to assist them in meeting their debt and unfunded liabilities because rising precious metals prices effectively devalues associated paper money.
7.A new world ‘Reserve Currency’, composed of a trade weighted group of currencies and a gold component for credibility, will be introduced to replace a troubled US dollar. This new and higher value currency will be used to price and settle accounts in the instance of international trade. National and regional currencies will continue to be used for domestic purposes, but will be conveniently devalued by both appreciating precious metals bullion and the new world reserve currency.

After the 2008/2009 crash, governments bailed out their failing financial institutions and investment banks through a variety of innovative measures. The next time round most governments will not be in a position to do it yet again. Even more troubling, the IMF (International Monetary Fund) will not be capable of rescuing the increasing number of insolvent governments and their financial institutions.

CONCLUSION

The circumstances immediately ahead are largely unprecedented. History is therefore only marginally useful as our guide to the future price of precious metals. We are now in genuinely unchartered territory. As such, as I said in the oppening paragraph, I fully expect gold to gold parabolic in 2012/2013 topping out at $10,000.

Why the Wealthy Own Gold
321Gold.com
By Mark Motive,Posted Jan 10, 2012

The global economy is in turmoil. Europe is on the verge of collapse, probably taking the US down with it. As the euro-crisis worsens, we march ever closer to outright monetization of European debt by the ECB and, covertly, by the Federal Reserve. The developed world is perilously close to a monetary deluge that could make the Weimar Republic's hyperinflation look like amateur hour.

Yet, I still talk to Wall Street analysts who clearly misunderstand gold's place in a portfolio. Meanwhile, many people who are part of the world's wealthy class are hoarding gold. What do they know that others don't?

If you ask the common man in the street about investing in gold, most will give you a strange look. After all, they believe investing is about stocks, bonds, and CDs.

If you ask someone with a bit more investing knowledge, they will tell you to buy gold during inflationary periods.

If you ask a relatively sophisticated investor, they will tell you to buy gold during deflationary and inflationary periods. Some may even say to buy gold during periods of uncertainty and instability, or when real interest rates are negative.

However, if you ask the world's wealthy class about gold they will give you a very different answer. At Plan B Economics, we've found that most of the world's wealthy class doesn't view gold as an investment at all! I would argue these folks have it right. Simply put, they consider gold to be a store of wealth and believe that anytime is a good time to own some gold.

With wealth storage (a.k.a. wealth preservation) as their goal, the rich are less fixated on daily fluctuations in gold prices. They aren't trying to earn short-term profits from gold ownership - they are trying to maintain their overall purchasing power. Since the wealthy have large asset bases, losses in purchasing power add up to big dollar figures, but the wealth preservation characteristics of gold are just as beneficial to the middle class.

Gold can protect real wealth because it tends to move in a different direction than other types of assets (i.e. gold is negatively correlated with other assets), making it an effective portfolio diversifier. When gold prices are falling, other forms of wealth are often rising in real terms. When gold is rising, other assets are usually falling in real terms. Gold has an offsetting effect when it is part of an overall asset base - but there are more important reasons the wealthy own gold.

As the world sinks into greater financial and political uncertainty, the wealthy want to protect their families from the unthinkable. Physical gold can store substantial wealth in a compact, universally-accepted form that can be hidden from the prying eyes of governments. So if/when collapse truly occurs, as it has consistently throughout history, the wealthy can escape with a big portion of their assets.

At this point, some of you reading this may be rolling your eyes, thinking such asset positioning is reserved for conspiracy theorists and survivalists, but history and current anecdotal evidence suggest this is how many wealthy people think. In fact, since I began writing on economics, I have encountered many wealthy people who have caches of food, precious metals, and weapons (but rarely admit it). They are acutely aware that if society broke down, they'd be the first scapegoats of the masses and any government rising to fill the power vacuum.

Ask the wealthy and middle class people who escaped Hitler's Germany (or many other similar authoritarian regimes throughout history) about gold. These people left behind houses, businesses, and paper assets to escape their home country. They even left behind savings and securities accounts, the withdrawal of which would have alerted authorities. (Moreover, German currency and securities were worthless in the eyes of non-German financial institutions.) They did, however, take as much gold as was physically possible. To these people, gold wasn't an investment, but a way to smuggle a lifestyle across borders in a suitcase.

I believe gold can provide the same utility to the wealthy and middle-class alike. Everyone should have a portion of their wealth stored in a fungible, highly-concentrated, portable form. The goal here is to prepare, not to predict. After-all, you buy homeowner's insurance but never expect your house to burn down.

So next time you consider gold as an investment, ask yourself why you are buying it. If you're worried about 20% up and down moves, then you are simply speculating on the price of gold. If you're looking for a portfolio diversifier, then you will be willing to accept gold's counter relationship to other asset classes. But if you are truly looking to protect from economic or political collapse, and need an enduring store of wealth, you may want to think like the wealthy class and hold physical gold in a hidden yet easily accessible location.

Fractal Analysis Suggests Dow Could Drop to 6,000 in 2012 and Gold Take Off Like It In 1979
Excerpt: The Dow’s inflated value, relative to the value of gold, was brought about by this debt-based monetary system. It follows naturally that in the event of the debt-based monetary system collapsing (it will eventually); the Dow:gold ratio could go back to levels prior to the introduction of this system. This level could be anywhere between 0.2 and 1, in my opinion. Therefore, it is possible to have a gold price of $5000, with the Dow at 1000. I do not say that we will have these levels, but it is certainly possible. All I am saying is that we have to be prepared for extremes never before seen in our lifetime.

I have written before of how similar today’s conditions are to that of the Great Depression and, based on that analysis, today’s economic fundamentals certainly support the theory of a massive drop in the Dow, relative to gold and even the US dollar.

Read full article here.

Still Clueless
I was reading the following comments from Peter Schiff's recent CNBC interview and just wondering just how high gold will go once the public finally "gets it." We've gone from $300/ounce to $1600/ounce and still nobody owns gold. How many zeros will we have to add to the end of the gold price once the public understands the seriousness of the situation?

**************************

In a recent interview on CNBC on December 30, Peter Schiff of Euro Pacific Capital said. "You need to own gold, and most people are still clueless about that."

"The fundamentals have never been better for gold and I think prices are going a lot higher," Schiff told CNBC in an interview looking back on gold’s 2011 performance and ahead into 2012.

"I still think it's headed higher. I'm not really sure when you talk about the turnaround, I don't think that the correction we've had in the last few months has turned the bull trend. I think we're still in a bull market. I think that trend is going to continue. The question is, is the correction over? I don't think there's much more left in the correction. ...

"The U.S. is a bigger disaster than Europe, but all the central banks -- the U.S., the [European Central Bank], the Bank of Japan, Bank of China -- everybody is printing too much money. Everybody has rates too low, and the world is looking for an alternative to currencies, not just the dollar or the euro, but the world. People are going back to real money and not enough people have made that switch. Most people are still clinging to the idea that there's a safe haven somewhere in currency. There is no safe haven in currencies. If you want to protect your wealth, if you want to store purchasing power, you can't do it in a currency. You need to own gold, and most people are still clueless about that.”

Absurd Gold/Silver Price Ratio; Why $500/oz Silver Is Now A Certainty In The Future
by Jeff Nelson, ETF Daily News
Arithmetic is a harsh mistress. Irrespective of how badly the banking cabal wishes to suppress the prices of gold and silver, and irrespective of how much brute force they are able to apply to the market over the short term with their (illegal) manipulations; the inexorable pull of supply and demand will inevitably overwhelm any/all such operations.

This is not the whimsical theory of some ivory-tower economist, but a simple fact of markets which has been demonstrated to us all in totally unequivocal parameters. Thus back in the “bad, old days” of manipulation – when the banksters still had large hoards of bullion to dump onto the market and crush the price – the price of silver was pushed to a 600-year low (in real dollars). What did the extreme manipulation of the silver market in the 1990’s reap for the banksters? A 1,000% increase in the price of silver over the following decade.


CLICK ON CHART TO ENLARGE

The misunderstanding of most novice investors in this sector (and a source of tremendous frustration) is that these short-term episodes of manipulation somehow delay (or even prevent) gold and silver prices from reaching their “maximum” levels. In fact the precise opposite is the truth: each and every manipulation operation translates to even higher long-term prices for gold and silver. It’s all just simple arithmetic.

Perhaps the easiest way to illustrate these dynamics is through comparing the gold market and the silver market. While both of these markets have been subjected to extreme manipulation, it is clear that manipulation of the silver market has been much more severe. There are two related numbers which illustrate this point.

Knowledgeable investors know that the long-term price ratio of gold versus silver (i.e. over roughly 5,000 years) has averaged approximately 15:1. This closely coincides with the ratio of the natural occurrence of these two elements in the Earth’s crust (approximately 17:1). Not only did this price ratio remain relatively constant over several millennia, but the fact that the price ratio so closely mirrors the rate of occurrence of the two metals shows that (in relative terms) our species has demonstrated a roughly equal preference for the two metals throughout recorded history.

These facts establish beyond any possible contradiction that over the medium or long term the price of silver must remain at close to a 15:1 ratio versus the price of gold. There is only one factor which could alter this arithmetic: if our preference toward the two metals changed. Has any such change in preferences occurred? Yes. Silver has become much more popular.

This increased popularity comes in two distinct forms. Modern technology has established silver as the most valuable/versatile of all metals, with more new silver-based patents being created than for any other metal. Along with that there has been an even more stunning/dramatic surge in investor demand for silver – a consequence of silver being perennially and extremely undervalued.

In 2011, the United States sold nearly 40 million Silver Eagle 1-oz coins while only selling approximately 1 million Gold Eagles – a near 40:1 ratio. This ratio is more than double the 5,000-year price ratio, and more than double the relative natural occurrence of silver. In other words, over the long-term this demand profile is totally unsustainable – and must result in (first) the total depletion of silver inventories, and (second) a rise in the price of silver sufficient to stifle silver demand sufficiently for balance to be restored.

However, the demand profile of silver is literally only half the story here – and the supply-side illustrates the futility of bankster manipulation in even more absolute terms. Given that silver is 17 times more plentiful in the Earth’s crust, we would expect the world’s mining industry to be producing about 17 times as much silver as gold each year. In fact actual production numbers are nowhere near this ratio.

To attempt to conceal the ridiculous imbalance between silver mining and gold mining, the banksters report silver mine production in (Imperial) ounces, while reporting gold production in (metric) tonnes. Fortunately anyone able to employ a calculator can overcome this clumsy attempt at deceit.

Converting all mine production to ounces, gold mine production was over 100 million ounces in 2010 while silver mine production was a mere 735 million ounces. Thus we have the miners producing only approximately 7 times as much silver as gold in 2010, while investors are exhibiting a 40:1 preference in buying silver versus gold. Meanwhile the gold/silver price ratio is an utterly insane 55:1 at the present time.

Keep in mind that the preference for silver over gold industrially is just as extreme. While industrial demand for gold has essentially remained flat over recent years, industrial demand for silver has risen by roughly 50% over the past 10 years – and by 18% in 2010 alone. This rabid industrial demand for silver (along with relatively little recycling) has resulted in global stockpiles of silver being decimated, with silver inventories plummeting by 90% between 1990 and 2005 alone.

Conversely, virtually every ounce of gold ever mined is still available today. As a result of decades of yet another gross imbalance in this market, there is less silver in the world today (relative to gold) than at any time in thousands of years. A precise ratio is impossible to construct, however estimates range from a (conservative) 6:1 level to the estimates of the more bullish commentators in the sector, who insist there is more (above-ground) gold in the world today than silver. This means that relative to supply, silver is currently under-priced by a factor of ten (if not more).

At the same time that silver is at its most popular point in history, there is less of it around (relatively) than at any time in history. Anyone with the slightest comprehension of markets understands what must happen: the price of silver must explode to a level which simultaneously dramatically depresses demand, while causing an explosion in silver mining activity. And note that the current parameters discussed here were after the 1,000% price increase over the past decade. Not only has the supply-deficit remained despite that 1,000% price increase, it’s gotten larger. Thus we might (conservatively) estimate that another 1,000% increase in the price of silver might just be enough to restore balance to the market.

What we have observed generally with respect to the gold and silver markets over the past few decades is nothing more than a long-term illustration of the principles of supply and demand, along with the absolute dictates of arithmetic. The extreme manipulation of the precious metals sector during the last decade of the last century has led to massive price increases in the prices of gold and silver in the first decade of this century – despite the banksters redoubling their efforts to suppress these markets.

Silver was suppressed even more extremely during those previous years, and so it nearly doubled the gains of the gold market over the past decade. This is nothing but a reiteration of one of the most obvious common-sense principles of human commerce: if you put something “on sale” you will increase buying and burn through inventories. If you price something at an extreme discount, you simply burn through inventories much, much faster.

The gold/silver price ratio has once again reached an absurd manipulation-extreme. This in turn is conclusive proof of the current, ruthless suppression of silver taking place in this market – as unequivocally demonstrated by the supply/demand parameters previously detailed. What does this mean over the longer term? That $500/oz silver is now a certainty in the future.

Why Has Gold Been Down?
By Jeff Clark, Casey Research

In spite of some short-term fixes, there remains no real resolution to the sovereign debt issues in many European countries. We're certainly not spending less money in the US, and now we're bailing out Europe via currency swaps with the European Central Bank. Shouldn't gold be rising?

Yes, but nothing happens in a vacuum. There are some simple explanations as to why gold remains in a funk.

1.The MF Global bankruptcy, the seventh-largest in US history, forced a high degree of liquidation of commodities futures contracts, including gold. Many institutional investors had to sell whether they wanted to or not. This is similar to why big declines in the stock market can force funds and other large investors to sell some gold to raise cash for margin calls or meet redemption requests.

2.The dollar has been rising. Money fleeing the Eurozone has to go somewhere, and some of it is heading into US bonds, which means first converting the foreign currency into dollars.

3.It's tax-loss selling season, something that's also impacting gold stocks. Funds and individual investors are selling underwater positions for tax purposes. Funds also sell their big winners to lock in gains for the year and dress up quarterly reports.

These forces have all acted to depress the gold price.

Notice I didn't say that gold has suddenly become viewed as a poor safe haven. Nor that many of the world's major currencies are no longer being debased… nor that global sovereign debt issues are resolved… nor that interest rates are positive. No, the fundamental reasons for owning gold are still intact. So don't let the selling depress you.

Let's put gold's recent price action into perspective. It peaked on September 5 at $1,895 (London PM Fix) and has thus been in decline for about three months. Yet look at the bull market's biggest three-month correction in relationship to the ultimate trend.

Click here to read the rest of the article.