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Time to take Advantage of Gold's Pullback?

By: Peter Schiff, Euro Pacific Capital

-- Posted Tuesday, 27 September 2011 | | Disqus

Dear Investor,

The recent sharp decline in gold and silver prices may be panicking buyers, especially those who are new to the market. However, I have been actively accumulating precious metals for more than a decade, and from my perspective, given the volatile nature of metals, this type of action is par for the course. In my experience, every sharp decline has shown itself to be an opportunity rather than a warning.

If you currently have a relationship with a Euro Pacific broker call him to discuss your options, including gold and silver certificates from the Perth Mint of Australia. Visit our website or call our Perth Mint department directly at 800-993-8350.

There is an old expression that markets take the stairs up but the elevator down. In this case, it seems precious metals missed the elevator completely and just fell down the shaft. But this type of sharp decline can be characteristic of a bull market. However, these drops tend to shake out the leveraged speculators and those who have jumped reluctantly on the bandwagon. At the first whiff of uncertainty, these uncommitted investors throw in the towel, leading to increased volatility.

This kind of sentiment tends to be overly emotional and misses the big picture. This latest gold sell off was sparked by Fed Chairman Bernanke's admission last week that Washington's Keynesian stimulus has failed. He admitted that despite trillion-dollar deficits and a gross devaluation of the dollar, the economic picture remains bleak. As such, he outlined the Fed's "Operation Twist" his latest stimulus effort. Taking the Chairman's distress to heart, investors dumped "risk assets" like gold and silver. But stimulus is the very reason why we have been buying precious metals in the first place.


While the Fed has been careful to avoid describing the Twist as new stimulus, this is exactly what it is. It is a policy that was first tried, and failed, in the early '60s. I'm sure that it will fail again. Instead of expanding the Fed's balance sheet with fresh money printing, it tries to encourage more borrowing and lending by lowering long term interest rates. Right now, the move has restored confidence. But I don't believe that it can last. When it fails, more quantitative easing will be unleashed.

In the meantime herd instincts seem to have taken over and many people are making bad decisions. They're betting that the Fed has turned off the monetary spigot for good, forcing investors to "get defensive." Losses from the recent broad stock market sell-off are likely generating margin calls, and many investors may be taking profits from their gold and silver investments to cover.

It's my belief that they are as wrong now as they were when this happened back in 2008. The reality is that the US economy is most likely in the midst of a depression. I believe the Fed and the Administration are going to do whatever it takes to mask that fact - and their only tools are spending and printing. If the economy fails to revive, I believe many more banks will start failing. To prevent another highly unpopular round of bank bailouts (possibly termed TARP II), the Fed will likely launch its next round of quantitative easing (QE III). If I'm correct, the prospects for gold and silver should be bright.


Given the gains we have seen thus far in 2011, many people may have felt this bull market had gotten ahead of them. They may be lamenting a train that had left the station. Well, perhaps the train just stopped, and even backed up a bit. I don't expect it to idle for long.

Remember gold is, in my view, temporarily losing its luster because the dollar is temporarily regaining some of its shine. But those buying dollars now are those who were surprised by the renewed weakness in the U.S. economy. They had previously sold their dollars to buy "riskier" assets that they thought would perform well as the U.S. and global economies recovered. As they concede their mistake, they are reversing those trades. They were wrong about the recovery and I think they are just as wrong about the dollar and gold.

It's my opinion that a weakening U.S. economy is far more bullish for precious metals than a strengthening one. That is because the Fed is more likely to print money, and in larger quantities, when the economy is weak than when it is strong. And so, I'm convinced that the economy will slow against a backdrop of inflation rather than deflation. Gold and silver are traditionally the best hedges against inflation.

Viewed through this perspective, the current correction can be an opportunity to buy physical bullion. But don't be cajoled into leveraged accounts or other gold sales rip-offs. (For more on common gold scams and rip-offs, CLICK HERE to read Peter's recent report.*)

But if you're looking to help protect your assets for the long-term, now may be the time. If you believe in the unreliability of paper money and the cluelessness of our economic leaders, don't get caught in the game of trying to find the lowest possible price.


We look forward to helping you make your first purchase or add to an existing position.



Peter Schiff 

CEO and Chief Global Strategist

Euro Pacific Capital


* By clicking to receive the download, you acknowledge that you understand Euro Pacific Capital's privacy policy, available for review here. Please note that Peter Schiff is CEO of both Euro Pacific Capital and Euro Pacific Precious Metals, which are unaffiliated companies. Neither Euro Pacific Capital nor any of its affiliates are responsible for the content of this Special Report. 


Precious metals are volatile, speculative, and high-risk investments. Physical ownership will not yield income. As with all investments, an investor should carefully consider his investment objectives and risk tolerance as well as any fees and/or expenses associated with such an investment before investing. The value of the investment will fall and rise. Investing in precious metals may not be suitable for all investors.


Note: This message, including attachments, is from Euro Pacific Capital, Inc. member FINRA/SIPC. This is not a solicitation of any order to buy or sell. The information contained herein is deemed to be reliable but is in no way warranted by us as to accuracy or completeness. Messages are monitored and retained by the Company, but the Company cannot guarantee the security of this message. If you are not the intended recipient of this message, promptly delete this message and notify the sender of the delivery error by return e-mail or calling 800-727-7922. You may not forward, print, copy, distribute, or use the information in this message if you are not the intended recipient.



Euro Pacific Capital, Inc. is a member of FINRA and SIPC.  This document has been prepared for the intended recipient only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy.  Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future.  All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in U.S. Dollars.  Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money.


Data from various sources was used in the preparation of this document; the information is believed but in no way warranted to be reliable, accurate and appropriate. 


Euro Pacific Capital, Inc. employees buy and sell shares of the companies that are recommend for their own accounts and for the accounts of other clients.


Investors should carefully consider the information about Euro Pacific Funds, including investment objectives, risks, and charges and expenses, which can be found in the Euro Pacific Funds' prospectus or summary prospectus.  Copies of the prospectus or summary prospectus are available from your registered representative, at the Fund's website,, or by calling 1 888 558 5851. You should read the prospectus or summary prospectus carefully before investing or sending funds.

-- Posted Tuesday, 27 September 2011 | Digg This Article | Source:

comments powered by Disqus - Peter Schiff C.E.O. and Chief Global Strategist

Euro Pacific Capital, Inc.
10 Corbin Drive, Suite B
Darien, Ct. 06840

Mr. Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly. As a result of his accurate forecasts on the U.S. stock market, commodities, gold and the dollar, he is becoming increasingly more renowned. He has been quoted in many of the nation's leading newspapers, including The Wall Street Journal, Barron's, Investor's Business Daily, The Financial Times, The New York Times, The Los Angeles Times, The Washington Post, The Chicago Tribune, The Dallas Morning News, The Miami Herald, The San Francisco Chronicle, The Atlanta Journal-Constitution, The Arizona Republic, The Philadelphia Inquirer, and the Christian Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg. In addition, his views are frequently quoted locally in the Orange County Register.

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkley in 1987. A financial professional for seventeen years he joined Euro Pacific in 1996 and has served as its President since January 2000. An expert on money, economic theory, and international investing, he is a highly recommended broker by many of the nation's financial newsletters and advisory services.


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