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Gold Will Break Previous High in Near Term



-- Posted Wednesday, 26 September 2012 | | Disqus

Source: JT Long and Brian Sylvester of The Gold Report  

 

Brien Lundin expects money printing by the Federal Reserve to raise gold above its $1,920/oz high, and as editor and publisher of Gold Newsletter, he considers it his job to show people how to profit. In this exclusive Gold Report interview, Lundin explains why he believes it is time to be aggressive in equity positions.

 

The Gold Report: We just had a third round of bond buying in quantitative easing (QE). Will QE3 help the economy?

 

Brien Lundin: It will not help the economy, but it will help Wall Street. It will help elevate the stock market, including precious metals and resource stock prices. Although that was not the Fed's stated goal, it will be the ultimate result.

 

As I have written lately, we now have "QE as far as the eye can see." There is no end to it. The Federal Reserve will use QE until it works. If it does not work, the Fed will ratchet up the program and print more money until it does work.

 

The Fed is using the brute force of money creation to eliminate the U.S. unemployment problem, but that is not a foundation upon which a sustainable recovery can be built. At the same time that the Fed is trying to build a towering economy, it is eroding the very foundation of that economy by issuing vast pools of liquidity.

 

TGR: At a recent Casey Research Summit, some speakers suggested that the stage is being set for inflation. Do you agree?

 

BL: I see the danger, but I think it is important for investors to recognize the differences between monetary inflation and price inflation.

 

Price inflation is a symptom of the underlying disease, which is monetary inflation. Every new piece of fiat currency created in the world that is not backed by gold raises the relative value of tangible assets, primarily the monetary metals gold and silver, but also other commodities.

 

For a number of reasons, I do not think we will see soaring price inflation in the U.S. as we saw in the 1970s anytime soon. There are other very powerful parallels with the 1970s, but I do not think that retail price inflation will be one. We are living through monetary inflation right now. That is why precious metals prices are rising.

 

TGR: The August edition of Gold Newsletter predicted what happened in the beginning of September: a gold price close to $1,800/ounce (oz). Where do you see things headed?

 

BL: That prediction of a mid-to late-summer price breakout was based on two things. First, typical seasonality issues came into play. Second was seeing gold trade into a consolidation pattern of an ever-narrowing price trend.

 

This kind of consolidation pattern has been evident many times before in this long bull market for gold. Eventually, the price of any commodity will break out of such a pattern and typically will return to the trend that was in force beforehand. For gold, the earlier pattern was an upward trend, so the odds were that it would break to the upside, and it did.

 

Breaking to the upside, the price pretty much predicted some action by the Fed, but QE3 really exceeded anyone's expectations for such action. I think the near-term goal for gold is to exceed its previous highs of around $1,920/oz. That will create a foundation for further gains.

 

TGR: Silver has followed gold higher. What is your thesis for silver going forward?

 

BL: Precisely the same as gold. Silver provides optionality on gold. It is a lever to gold prices. Silver rises more quickly than gold and it falls more quickly than gold.

 

Despite its volatility, or rather because of it, silver is a way to realize greater profits along the long-term uptrend by playing the interim cycles.

 

A lot of people talk about the advantages silver's industrial uses provide. But the industrial uses really play into the price when silver is under, say, $10/oz. When the price goes north of $10/oz to levels that we see today, it is purely due to silver's monetary role.

 

TGR: You have gone from a largely passive position in most of the companies you write about to an aggressive position. What happened?

 

BL: This summer, a few of the companies that I recommended were too good to resist even in a down market. I recommended that readers peck away at these stocks and accumulate them, buying a little bit here and there on weakness. I advised not jumping in headfirst until we saw signs, or even confirmation, that gold was breaking out of its consolidation pattern. Once we saw that happening, I told readers it was time to get more aggressive and start building larger positions in junior mining shares that remained dramatically undervalued.

 

TGR: Did you see that as a bottom?

 

BL: Yes. We bottomed in late July or early August. It was the typical seasonal pattern we predicted, just like clockwork.

 

TGR: How do you like Mexico as a jurisdiction?

 

BL: Mexico is a great place to invest. There has been a lot of news about the danger of the drug gangs, but the companies in production or working there are doing fine and handling any issues.

 

TGR: The New Orleans Investment Conference is approaching. What can attendees expect to take away from this year's event?

 

BL: The conference always seems to come at a crucial turning point in the markets, but with the advent of QE3 and the November election, I cannot think of a more important time for investors to be prepared than right now.

 

We will have a blockbuster roster of geopolitical and economic analysts to talk about the election and its impact on the economy and investors. Charles Krauthammer, probably the most influential political commentator in America, will be there, along with Rick Santelli, the godfather of the Tea Party. Peter Schiff, Sarah Palin, Dinesh D'Souza and Marc Faber are coming. Doug Casey and many of today's top precious metals and resource stock analysts will speak.

 

We have some fun events planned as well. This year's political debate will pit the conservative Charles Krauthammer against the liberal James Carville, with Doug Casey defending the libertarian position. That is always a big hit.

 

TGR: Before we let you go, do you have an election prediction?

 

BL: Looking at the political landscape right now, I think the odds favor President Barack Obama's re-election. I would put the odds at 60/40 right now. Obama's re-election would be an extremely bullish development for investors in gold, silver and resource stocks.

 

TGR: Why is that?

 

BL: It would signal a continuation of government spending and money printing. Mitt Romney has spoken out against QE and has said he probably would not reappoint Ben Bernanke as Fed chairman. In contrast, the Obama administration would apparently continue the policies that have led to these high metals prices.

 

TGR: Brien, thanks for your time and insights.

 

With a career spanning three decades in the investment markets, Brien Lundin serves as president and CEO of Jefferson Financial, a highly regarded publisher of market analyses and producer of investment-oriented events. Under the Jefferson Financial umbrella, Lundin publishes and edits Gold Newsletter, a cornerstone of precious metals advisories since 1971. He also hosts the New Orleans Investment Conference, the oldest and most respected investment event of its kind, Oct. 24–27.

 

Streetwise - The Gold Report is Copyright © 2012 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

 

The Gold Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report.

 

From time to time, Streetwise Reports LLC and its  directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

 

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

 

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

 

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.


-- Posted Wednesday, 26 September 2012 | Digg This Article | Source: GoldSeek.com

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