Russell - Expect $5,000 as US Has to Back Currency
Excerpt from King World News
With Gold With gold trading higher along with silver, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary, “Russell Looks ahead -- With inflation heating up as far as American consumers are concerned, the pressure is on the Bernanke Fed to "cool it" on its quantitative easing. I think the stock market (now slumping) and the dollar (now rising) are reflecting this. Thus the Fed might be setting off a temporary slump in the summer economy. If so, Bernanke could announce, "See, if we ease up, the economy eases up as well." All of which strengthens the case for QE3. Of course, President Obama would love a late pick-up in the US economy as the nation moves into the 2012 election period.”

Russell continues: “So the Russell crystal ball says, "Prepare for the summer doldrums (maybe even a slump), and then be ready for an economic revival in the fall and into 2012. Also get ready for all-out inflation as the Fed steps on the QE3 accelerator in late 2011. I think the gold action goes along with the above scenario. Why take profits or sell your gold, when the real move in gold is slated for 2012 and beyond?

Why is China so intent on accumulating gold? My thinking is that China is preparing its renminbi to replace the US dollar as the world's reserve currency. To become the new world power, China needs two items:

(1) A military second to none.
(2) The world's most trusted and wanted currency.

(1) China is now on an all-out campaign to build up its military.
(2) China wants the renminbi to backed with a huge percentage of gold, thereby making the renminbi the world's best and most trusted currency.

To compete, I believe that somewhere head the US will have to back its current irredeemable fiat currency with gold. In order to do that, the US will have to boost the price of its huge gold hoard to a level where the dollar may be backed anywhere from 50% to 100% with gold. That could mean unilaterally raising the price of gold to maybe $5000 and ounce or more...

I thought that gold, closing higher, in the face of the stronger dollar, was significant. Gold appears to be advancing against almost all fiat currencies (is this a preview of the future?).

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It is interesting that Russell noted gold is advancing vs all fiat currencies. Gold breaking out to new all-time highs in the Euro as well as the Pound will bring in even more buying. Gold has been trading strong and steady for quite some time, let’s see if that trend continues.

James Turk - Gold to Have a Staggering Up-Move This Summer

With gold close to new all-time highs in the Euro and the Pound and silver beginning to stabilize, today King World News interviewed James Turk out of Spain. When asked about the volatility and what he expects this summer Turk stated, “I think this summer is going to surprise a lot of people. Many are thinking this is going to be another typical summer where precious metals prices are weak, but it doesn’t always happen that way Eric. Sentiment is set up this way because it has been 29 years since we have seen a big rally in the summer. Back in 1982, the Mexican debt default lit a fire under the precious metals and the gold price nearly doubled over the next six months.”

Turk continues:

“This year it is not Mexico in the headlines, but rather Greece that is ready to default. Of course the other big news item coming up this summer is the Federal Reserve’s announced intention to end QE2. It’s amazing that so many market participants are taking the Federal Reserve at their word. 

 

All one has to do is look at how much money the US government is borrowing and what they intend to borrow in the future to meet their spending needs to clearly understand that the Federal Reserve is going to keep buying the US government’s paper. This is the point that John Williams made clear in his KWN interview.

 

I think we have to be prepared for tremendous volatility and the possibility that this summer could be a repeat of 1982 where gold took off to the upside in a major way. Gold became the go to asset in the summer of ’82 that everyone wanted to own.  

 

The extraordinary rally in the summer of 1982 began in the second week of June and by the first week of September gold has risen 50%. That’s a 50% move in less than three months!”

When asked about silver specifically Turk replied, “The gold/silver ratio has climbed back into the 40’s, and from a technical point of view is very close to achieving my mid-40’s target. That suggests to me that silver’s low is in place. My only concern here Eric is that this is options expiry week. We know from past experience that the shorts try to keep precious metals prices from rising to have as many possible calls expire out of the money. 

 

The other side of the coin is that if investors use options expiration weakness to buy, this has generally provided a good entry point. So don’t be worried if you see any additional price weakness this week.

People should be saying to themselves that they don’t care what the gold price is doing today, if this is the day of the month they are scheduled to buy, then buy it. Continue on with their dollar cost averaging plan and the same goes for silver.

 

Too many people who are new to the precious metals markets attempt to trade them. Non-professionals are attracted to trading like moths to a flame and both are very dangerous. The bottom line is to focus on accumulating physical gold and silver because at the end of this bull market what will matter is not how many dollars you have, but how many ounces of gold and silver you own.”

“Silver Price: The Least You Should Worry About”
By Jeff Clark, BIG GOLD
I heard some disturbing reports about silver supply last month that I felt every investor should know. And while precious metals are currently in correction mode, the long-term concerns with supply won’t disappear anytime soon. In attempt to get a handle on the bullion market, I spoke to Andy Schectman of Miles Franklin, who has contacts that run deep in the industry. What he sees everyday might just compel you to count how many ounces you own…

Jeff Clark: Andy, tell us about your industry contacts and how you get the information you're privy to.

Andy Schectman: We source our product from three of the largest six primary U.S. mint distributors. Having 20 years of experience with these sources, as well as the dealers in the secondary market, we're as tied into the industry as anyone.

Jeff: You made some interesting comments to me about supply and premiums. Tell us what you’re hearing and seeing in the bullion market right now.

Andy: I feel as though I'm the boy who cries wolf or that I've been beating the same drum for too long. But in reality, it has been my feeling since late 2007 that ultimately this market will be defined less by the price going parabolic – which I think ultimately will happen – and more by a lack of supply. You see occasional reports that state it’s just a lack of refined silver or lack of silver in investable form. But as far as I'm concerned, there is a major supply deficit issue, and it’s getting worse.

Take the U.S. Mint, for example. Right now, as we talk, you can barely get silver Eagles. We’re seeing delivery delays of three to four weeks, and premium hikes of a dollar or more in the last three weeks. Most of the suppliers in the country are reluctant to take large orders on silver Eagles because they don’t know (a) when they’ll get them, and (b) what the premiums will be when they arrive.

I was talking to the head of Prudential Bache and asked him about silver Eagles. He said, "You know, as soon as the allocations come in, they’re sold out. We can't keep them in." This is coming from one of the largest distributors of U.S. Mint products in the country.

And this is all occurring in an environment that has only minimal participation by the masses. Few people in this country have ever even held a gold or silver coin. So, if it's this difficult to get bullion now, what's it going to be like when it becomes evident to the masses they need to buy? This is what keeps me up at night.

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