Gold’s chart clearly shows that the bull market is far from over.

Despite a recent decline back to just below $600, the long-term trend of rising prices is still fully intact.

Indeed, gold merely got a little ahead of itself. Now, it’s coming back in line with a more stable pattern of price gains. In short, a normal, healthy pullback.

Plus, the long-term fundamentals driving gold higher are getting more powerful ...

There’s Not Much
Gold to Go Around

Just two days ago, the news hit the wires that production in South Africa — the world’s number-one gold producer — plunged 6.1% in the three months ended July.

And that’s a continuation of a longer-term trend: Over the last ten years, gold production in South Africa has plummeted 50%!

You think that’s bad? On the same day, Australia, the world’s second-largest gold producer, said production swooned to its lowest level in eleven years.

Meanwhile ...

The U.S. Dollar Is
Riddled with Problems

The U.S. government still owes $44 trillion ... in the way of Social Security benefits, Medicare benefits and more ... in the $776 billion annualized in trade deficit this country has with the rest of the world ... and the nearly $4 trillion Washington owes to foreign investors buying our bonds.

How could little green pieces of paper ever pay off those debts? They can’t! We’ve hocked our future off to the rest of the world, and our lenders are going to soon make their claims on our economy:

        They’re going to want higher interest rates, or they’ll dump their dollars, sending the greenback even lower.

        They’re going to want to pay less for bonds, and less for stocks to compensate for the risk of a weak dollar.

        And they’re going to want more gold, the ultimate financial insurance policy. Gold to protect their butts against the fiscal and monetary imbalances in this country.

The way I see it, plunging production, rising demand, and a weak foundation — AKA a weak dollar — is a recipe for much higher gold prices to come.

Add in the chart formation I just showed you, and you can see why I’m getting ready to buy gold like crazy.

Now, timing is crucial, and I can’t give you specific recommendations in Money & Markets. That wouldn’t be fair to my Real Wealth Report subscribers.

But I can tell you this: I think we’re approaching the last chance to buy gold at the $600 level. A few months from now, we could easily be staring at $750 gold. That means gold shares, which have had their first decent pullback in over a year, are big-time bargains.

If you’re a Real Wealth Report subscriber, I’ll let you know when and what to buy the moment I pull the trigger. You’ll get a flash alert by e-mail if need be. If you’re not a subscriber, you can join for only $99. The potential profits could pay you back many times over.

I’m Just As Bullish
On the Oil Market ...

Does it look like oil’s long-term uptrend is over? Hardly!

Granted, the recent decline has been sharp and swift. 

But as you can clearly see from this chart, oil’s bull market is still alive and snorting.

Moreover, the price of oil is now coming into important technical support at the $63 — $65 level. It could fall a bit more, to as low as $60, but that doesn’t mean it won’t head up from there. Quite the contrary!

Reason: The fundamental forces behind oil prices look rock solid:

A. China will keep pushing energy prices higher.

China is the second-largest oil consuming country in the world. In July, its demand for oil surged 12.2% to a whopping 6.7 million barrels a day. That’s the fourth consecutive month of double-digit growth.

In other words, China’s demand for oil is not slowing down and neither is its economy. Industrial profits are growing by leaps and bounds — through July they’re up 29% from the same period last year. Retail sales are also on fire, up 13.8% in August year over year. I can’t find one sign of a slowdown in China.

B. Despite the slowdown in real estate, I don’t think the U.S. economy is slowing much, either.

If our economy were slowing as much as most analysts would like you to believe, China’s economy, which is hugely dependent on the U.S., would not be firing on all cylinders. Their trade surplus with the U.S. would not have reached record highs in August, as it just did.

So, the world’s number-one consumer of oil — the U.S. — probably isn’t seeing the decline in energy demand that the markets believe it is.

C. Oil supplies are still tight as a drum.

It’s a well-known fact that Middle East oil fields are now producing more “sour” crude oil than ever before, vs. the more easily refined “light, sweet” crude oil. That in itself is a clear sign that the world’s largest oil reserves are in decline. With the exception of Venezuela, this is true of virtually all OPEC countries.

And Venezuela’s oil won’t do us much good, because madman Hugo Chavez doesn’t like us. So he’s selling most of the country’s oil to other countries, namely China.

Up north, Canada’s large and strategically convenient oil production is falling. Just two days ago, Canada said oil production dropped in 2005 for the first time in six years. That’s not good!

What about the recent oil find in the Gulf of Mexico? Some 15 billion barrels. It’s a nice discovery, but it’s three miles under the sea and is at an estimated five years away from sustainable production. That leaves plenty of time between now and then for oil and gas prices to go much higher.

Now, take the three factors I just told you about, and look back at my chart. Which would you rather do — sell oil and oil shares or use this opportunity to buy them up on the cheap?

Here’s What I’m Doing ...

I’m looking at oil and gas shares that are trading at absurdly low price-to-earnings ratios.

I’m eyeing five stocks right now for my Real Wealth Report, which I’m looking to scoop up in the next few days. One is trading at an insanely low six times earnings. Another is trading at eight times earnings. A third is trading at seven times earnings.

Think about that for a moment. In the heyday of the tech bubble, companies were getting 50 ... 75 ... 150 times their earnings. And these were companies that merely had a new software idea ... a new piece of hardware ... a next-generation operating system.

They had little, if any, hard assets ... fleeting business plans ... inexperienced managements.

Here we’re talking about oil and gas companies with real earnings, real assets, spinning out real wealth.

If you don’t yet own any oil companies, you’re about to see one of the greatest buying opportunities in the energy markets since at least the middle of 2004, when oil was trading at about $40 a barrel.

And as I told you, I feel the exact same way about gold shares.

Opportunities like these don’t come around that often, so get ready to take advantage while you can. Stay tuned ...

Best wishes,
Larry

About MONEY AND MARKETS

MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Monica Lewman-Garcia, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.

About LARRY EDELSON

With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research’s customers to prudent investments in the sector. His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors. Mr. Edelson is also an accomplished analyst and writer, making substantial contributions to Weiss Research’s Safe Money Report and Money and Markets. He holds a B.A. Degree from Columbia University and has three children. To read recent Money and Markets issues written by Larry Edelson, click here.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com

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-- Posted Thursday, 14 September 2006 | Digg This Article