According to the U.S. Census Bureau, there are 6.783 billion earthlings. Meanwhile, CPM Group, a highly respected industry organization, estimates there are 4.8 billion ounces of above-ground gold in the world. And this includes jewelry, electronics, and dental. So, even if everyone around the world volunteered to have their chain, cross, or tooth melted into a coin, we’re already short. Those towards the end of the line are out of luck.

However, it’s worse than that. Of all the physical metal ever mined…

• 2.1 billion ounces, or 43%, is found in jewelry, decorative, and religious items.
• Private stock – gold already held by various private parties – accounts for 1.1 billion ounces.
• Official reserves (central banks, IMF, etc.) stand at 1 billion ounces.
• Industrial use accounts for 530 million ounces.

Very little of this is likely to come available for purchase in coin form. After all, you’re not selling any of your gold, and neither are many banks or institutions. Most everyone is buying.

So for those who don’t yet have a gold coin (or you greedy investors who want more than one), this pretty much leaves us with mine production and scrap sources.

CPM forecasts that total new supply in 2009 will be around 122 million ounces. Only a small percentage of this is made into gold coins and bars, but if all of it were, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman, and child on earth this year. A product of this dimension is about half the size of that small button on your shirt collar.

Since this supply is only available annually, it means 0.018% of the global population – one in every 55 people – could buy a one-ounce gold coin this year. Or, said differently, it would take 55 years before everybody had one, assuming the population never increased (it is) and supply never decreased (it is).

But it’s worse than that. Actual 2009 coin production will be around 5 million ounces (excluding medallions or “rounds”), leaving two one-hundredths of a gram of gold (or 0.3 of a grain) available this year for each of the planet’s inhabitants. This is about half the size of the sesame seed that fell off your hamburger bun at dinner last night. It means that only 0.0007% of earth’s citizens – or one in 1,356 – can buy a one-ounce gold coin this year, and it would take 1,356 years for everyone to get one.

How’s that for a supply squeeze?

But it’s worse than that. Demand continues rising. Gold is more frequently in the news, attracting more customers every day. Hedge funds, which never before considered gold, are now buying physical metal (Greenlight Capital actually sold $500 million of GLD and bought physical gold). Central banks are net buyers of gold for the first time in 22 years. China is running TV ads encouraging its citizens to buy gold and silver. Last month Russia bought more gold than they actually produced. In a recent survey, 20 out of 22 fund managers bought physical gold for their personal investments. In other words, some investors are already scrambling to get it… and in big quantities.

But it’s worse than that. Most of the ramifications of the money printing and dollar debasement haven’t even surfaced yet. How will the general public react when the dollar is crashing and standards of living are threatened? What will they do when milk and gas prices surge to twice what they are now? How will the greater collective respond when they lose faith in government interventions? Where will they invest when they see gold and silver prices screaming upward and don’t want to be left behind?

The panic into gold by the general public hasn’t begun yet. Available supply is scarce and will get smaller. There won’t be enough.

Better get your speck while you can.

Regards,
Jeff Clark

Source: What if Everyone in the World Wanted a One-Ounce Gold Coin?

Before you tell me I’m wrong, let me ask it this way…

• If inflation returns, or even hyperinflation…
• If the economic crisis persists and gets worse…
• If uncertainty and fear continue, and chaos and rioting begin…
• If stock markets languish or suffer another meltdown…
• If the recovery spending of the world’s governments proves futile…
• If government interference in the economy continues to increase…
• If the value of the U.S. dollar takes a major fall…
• If world recovery from the current recession/depression takes years…
• If you’re still wondering whether you have enough “safe” money…

…would you feel you own enough gold?

If all those things come to pass, I suspect many of us, including myself, would wish we had a few extra gold coins or bars stashed away.

So let’s assume you answered “No” to my question and need to add some ounces to your collection… is now a good time to buy?

The Best Time to Buy Gold?

Before glancing at the chart below, if you had to pick the month with the weakest average gold price, which would you select?

In our current 8-year bull market, June has seen the lowest return for gold. In other words, it’s been, on average, one of the best times to buy.

How does this compare to the bull market of the 1970s?

In the last great bull market, summer also was a good time to buy gold (although April was even better.)

What about gold stocks?

Since 2001, July and October have been the weakest months for gold stocks, as measured by the AMEX Gold Bugs Index, and the best times to buy.

However, keep in mind that these are price tendencies and not certainties. There were Junes when gold was up, and some Julys when gold stocks were up. Meaning, avoid using this chart for trading purposes or in anticipation of an immediate gain. Instead, use it to prepare for possible gold price weakness ahead. And if the weakness shows up, treat it as a buying opportunity and add to your holdings to position yourself for the next leg up in the bull market. Consider that this summer could be the last chance to buy gold for three figures.

Don’t lose sight of where we are at this point in the recession – in an intermission in the bad economic news. When it becomes apparent that the good ole days aren’t coming back, sentiment – and markets – could move rapidly. And gold is one of the best forms of capital that can protect you in a financial Armageddon. That gold was up in 2008 is a reminder of its protective power.

How much gold should you have? Continue to accumulate physical gold until you can honestly say you don’t care how many dollars Ben Bernanke prints.

Having physical gold in your possession is always a good idea in times of economic turmoil – there is no “uncertainty hedge” like it. But to actually make money, you should also look at premium gold stocks. Our current favorite has been so consistently successful that we call it “48 Karat Gold.” Click here to learn more.

The Great Depression Speaks

The most notable example of what happens to gold stocks in a prolonged deflationary environment is the Great Depression. However, the United States was on a gold standard at the time, so miners had a guaranteed selling price – which was a good thing for them, because their operating costs were plummeting. So the comparability isn’t perfect, but let’s see what we can learn.

When the stock market crashed in 1929, gold stocks were part of the general wreckage (sound familiar?). The market then rallied and recovered almost 50% of its losses by April 1930, with gold shares again tagging along. It’s what happened next that gives us our first clue about deflation’s effect.

When the bear market resumed in the summer of 1930, all securities sold off again – except gold stocks. Gold shares stayed basically flat until early 1931, when they boarded the elevator and headed for the penthouse.

Let’s look at how shares of Homestake Mining, the largest gold miner in the U.S. at the time, and Dome Mines, Canada’s senior producer, performed during the Great Depression.

And the chart doesn’t show that you could have bought both stocks at half their 1929 price five years earlier, which would have led to gains of around 1,000%. And get this: both companies paid healthy and rising dividends as the depression wore on; Homestake’s dividend went from $7 to $15 per share, and Dome’s from $1 to $1.80.

Yes, volatility was high in the gold stocks throughout the depression, with occasional wild price swings, but after the 1929 crash most of the volatility was to the upside.

The bottom line is that the two largest gold producers – during a time of soup lines and falling standards of living – handed investors five and six times their money in four years.

From Homestake’s chart, you get a clear picture of what the stock did compared to the market as a whole:

You’ll notice the large spike down in both Homestake and the Dow during the 1929 crash… but then look at Homestake’s recovery immediately afterward, returning close to its old high. This is eerily similar to our recent pattern: our stocks sold off violently last October but have since doubled or more from their bottoms.

You’ll then notice that Homestake took almost two years to exceed its old high, but once it broke out, it was off to the races. The stock doubled four times in five years during a seven-year run to its peak after the ’29 crash.

The conclusion? If history is any guide, gold stocks can hold their own against deflation. And they could profit tremendously if the demand for gold as a safe haven continues to grow.

Gold vs. Deflation

On April 5, 1933, President Roosevelt issued an executive order forcing delivery (confiscation) of gold owned by private citizens to the government in exchange for compensation at the fixed price of $20.67/oz. And less than nine months later, he raised the gold price to $35, effectively diluting the dollar in every wallet 41% overnight and swindling everyone who had turned in his gold.

We don’t know exactly what an untethered gold price would have done during the depression, but given its distinction in history as a store of value, it’s likely to retain its purchasing power in a deflationary setting regardless of its nominal price. In other words, while the price of gold might not rise, or could even fall, your best protection is still gold.

But with this said, the overriding concern is that in a fiat system, any deflation will be met with an inflationary overreaction (as we’re seeing). And the worse the deflation, the more extreme the overreaction will be.

It’s for this reason that the editors of BIG GOLD urge you to own physical gold, in your possession and under your control, given its reliability as a store of value in both inflationary and deflationary environments. If you have less than our recommended one-third of your investable assets in some form of gold, check around for places to buy gold coins and bars at good premiums.

The Silver Lining

For those with an inclination toward silver, our research points to clear signs that silver is increasingly being viewed as a store of value and not just as an industrial metal.

Here’s a comparison of silver’s performance vs. base metals over the past six months (10-1-08 through 3-31-09), which includes last fall’s meltdown:

Silver               +6.7%
Copper            -36%
Lead                -18%
Aluminum        -35%
Nickel              -25%
Zinc                 -13%
GFMS Index*  -54%

[*Based on the average equally weighted settlement price for aluminum, copper, lead, nickel, tin, and zinc.]

If silver were viewed solely as an industrial metal, the price would be off sharply.

This doesn’t mean we think silver or silver stocks can’t go temporarily lower from here, but rather that the demand for silver as a store of value metal will be growing.

Bottom line: Whether we’re served debilitating deflation or insidious inflation, holding gold (and silver), along with an appropriate allocation of precious metals stocks, offers us both a fort for protection and a canon for profit.

Buying physical gold and silver as safe-harbor assets is for many investors a no-brainer at this point. But only a few have heard of another prudent gold investment – one that has gone up more than 50% in 2008, at the exact same time when the overall stock market bombed. You don’t want to miss out on owning this “48 Karat Gold” stock… click here to learn more.

Source:  Gold Stocks in a Depression

The Great Depression Speaks

The most notable example of what happens to gold stocks in a prolonged deflationary environment is the Great Depression. However, the United States was on a gold standard at the time, so miners had a guaranteed selling price – which was a good thing for them, because their operating costs were plummeting. So the comparability isn’t perfect, but let’s see what we can learn.

When the stock market crashed in 1929, gold stocks were part of the general wreckage (sound familiar?). The market then rallied and recovered almost 50% of its losses by April 1930, with gold shares again tagging along. It’s what happened next that gives us our first clue about deflation’s effect.

When the bear market resumed in the summer of 1930, all securities sold off again – except gold stocks. Gold shares stayed basically flat until early 1931, when they boarded the elevator and headed for the penthouse.

Let’s look at how shares of Homestake Mining, the largest gold miner in the U.S. at the time, and Dome Mines, Canada’s senior producer, performed during the Great Depression.

And the chart doesn’t show that you could have bought both stocks at half their 1929 price five years earlier, which would have led to gains of around 1,000%. And get this: both companies paid healthy and rising dividends as the depression wore on; Homestake’s dividend went from $7 to $15 per share, and Dome’s from $1 to $1.80.

Yes, volatility was high in the gold stocks throughout the depression, with occasional wild price swings, but after the 1929 crash most of the volatility was to the upside.

The bottom line is that the two largest gold producers – during a time of soup lines and falling standards of living – handed investors five and six times their money in four years.

From Homestake’s chart, you get a clear picture of what the stock did compared to the market as a whole:

You’ll notice the large spike down in both Homestake and the Dow during the 1929 crash… but then look at Homestake’s recovery immediately afterward, returning close to its old high. This is eerily similar to our recent pattern: our stocks sold off violently last October but have since doubled or more from their bottoms.

You’ll then notice that Homestake took almost two years to exceed its old high, but once it broke out, it was off to the races. The stock doubled four times in five years during a seven-year run to its peak after the ’29 crash.

The conclusion? If history is any guide, gold stocks can hold their own against deflation. And they could profit tremendously if the demand for gold as a safe haven continues to grow.

Gold vs. Deflation

On April 5, 1933, President Roosevelt issued an executive order forcing delivery (confiscation) of gold owned by private citizens to the government in exchange for compensation at the fixed price of $20.67/oz. And less than nine months later, he raised the gold price to $35, effectively diluting the dollar in every wallet 41% overnight and swindling everyone who had turned in his gold.

We don’t know exactly what an untethered gold price would have done during the depression, but given its distinction in history as a store of value, it’s likely to retain its purchasing power in a deflationary setting regardless of its nominal price. In other words, while the price of gold might not rise, or could even fall, your best protection is still gold.

But with this said, the overriding concern is that in a fiat system, any deflation will be met with an inflationary overreaction (as we’re seeing). And the worse the deflation, the more extreme the overreaction will be.

It’s for this reason that the editors of BIG GOLD urge you to own physical gold, in your possession and under your control, given its reliability as a store of value in both inflationary and deflationary environments. If you have less than our recommended one-third of your investable assets in some form of gold, check around for places to buy gold coins and bars at good premiums.

The Silver Lining

For those with an inclination toward silver, our research points to clear signs that silver is increasingly being viewed as a store of value and not just as an industrial metal.

Here’s a comparison of silver’s performance vs. base metals over the past six months (10-1-08 through 3-31-09), which includes last fall’s meltdown:

If silver were viewed solely as an industrial metal, the price would be off sharply. This doesn’t mean we think silver or silver stocks can’t go temporarily lower from here, but rather that the demand for silver as a store of value metal will be growing.

Bottom line: Whether we’re served debilitating deflation or insidious inflation, holding gold (and silver), along with an appropriate allocation of precious metals stocks, offers us both a fort for protection and a canon for profit.

Buying physical gold and silver as safe-harbor assets is for many investors a no-brainer at this point. But only a few have heard of another prudent gold investment – one that has gone up more than 50% in 2008, at the exact same time when the overall stock market bombed. You don’t want to miss out on owning this “48 Karat Gold” stock… click here to learn more.

Regards,
Jeff Clark

Source: Gold Stocks in a Depression

Although the press has now set gold aside for hotter stories, I can tell you demand for gold coins continues at unprecedented levels worldwide, and production is still struggling to keep up. Take a look at these recent reports:

***Sales of the Austrian Philharmonic gold coin soared 544% in the first two months of 2009 (vs. the same period the year before), with production at the country’s mint running quadruple its usual volume.

***The demand for Krugerrands is at its highest level since 1986. The South African refinery recently doubled production of blank gold coins to 20,000 ounces per week.

***China, now the fastest-growing market for gold, saw 2008 sales (measured in dollars) rise by 50% over the year before – and total sales in January 2009 were one billion yuan (US$146 million), 30% more than all of last year.

***The U.S. Mint sold 193,500 one-ounce gold Eagles in the first seven weeks of 2009 – equaling the number shipped in all of 2007 and about matching the first half of 2008.

***Russia’s Sberbank says it has “never seen such strong demand for investment coins.”

With this incredible interest in gold, it’s worth going over where to go for the best deals in bullion… and what the stated wait times and premiums are. Here are the dealers that have consistently treated their clients (and our readership) well over the years:

Kitco (Kitco.com; 1-877-775-4826). All bullion products are available at Kitco and can be shipped within 24-48 hours of a paid order. Premiums are slightly higher than our other dealers recommended below, but what’s particularly attractive at Kitco is that you can get silver for less than 1% over spot… Its pool account is currently charging only 14 cents over spot (premium fluctuates daily), which is a great way to build your silver holdings while waiting for physical premiums to come down.

The Coin Agent (thecoinagent.com; 1-888-494-8889, or email thecoinagent@gmail.com). Wayne Lemonier currently offers immediate delivery on paid orders for all gold coins except the Eagle, which takes two weeks.

Premiums for gold coins are 6% over spot for Maple Leafs, 6.5% for Philharmonics and Krugerrands, and 7% for Eagles (one of the lowest in the industry).

Silver bars are at the lowest premium we know of: A 10-ounce silver bar costs $1.75 per ounce over spot, and 100-ounce bars are only $1.50 per ounce over spot. American silver Eagles are spot + $4.50, and silver Canadian Maples are spot + $4. Shipping and handling for silver is $20 per 100 ounces.

Border Gold (bordergold.com; 888-312-2288, ext. 7). Both gold and silver Maple Leafs are readily available and can ship the day an order is paid. Border told us premiums are slightly higher this year than last because the Royal Canadian Mint raised its prices.

Premiums on gold Maple Leafs are only 5.5%, one of the lowest in the industry. Shipping and insurance is $25 for one or two coins. A one-ounce gold bar is spot + $25; 5-ounce and 10-ounce bars are available in limited quantities at spot + $22 per ounce.

The one-ounce silver Maple Leaf is $4 over spot for up to 99 coins and then $3.25 per coin. Both 10- and 100-ounce silver bars cost $2.50 above spot, with the 100-ounce silver taking a week to deliver.

ASI (assetstrategies.com; 1-800-831-0007). Gold Maple Leafs, Philharmonics, and Krugerrands can be shipped immediately upon a paid order, with American Eagles currently taking about three weeks.

One-ounce gold coins are 7.5% to 8% over spot; Eagles are 8.5% to 9%. One- and 10-ounce gold bars can be had at 6%. One-ounce silver Eagles are $4.30 over spot. A 100-ounce silver bar is $2.20 per ounce, and a one-ounce bar is spot + $2.50. Costs for junk silver vary but average about $2.20 per ounce over spot.
Some of our readers ask… why don’t we recommend any of the larger dealers?

Availability and premium are the primary considerations in selecting a bullion dealer. Some of the larger houses may match the prices of our recommended dealers; however, there’s an intangible issue: the hard sell.

Many of the big dealers push high-margin numismatic coins. So while you may get good prices and delivery on your bullion coin, beware the salesman who begins talking up rare coins. You won’t experience this with our smaller dealers, and it’s this no-hassle service that gets our business. If you start to hear, “Hey, my friend, I have a great deal right now on a rare Swiss coin…,” you might want to reconsider where you shop.

Gold is the safe-haven investment in times of crisis, and more and more investors worldwide realize this. But even though gold has risen more than 140% in the last five years, there is something that can give you even higher returns: we call it Toronto’s Secret Gold Investment.

Source: Where to Find the Best Deals in Physical Gold

The broader markets were of course making year-to-date lows at the same time, and unlike gold stocks, they continued falling after a short intermission. In fact, the Dow fell 2,000 points after Obama was elected. In sharp contrast, the mining stocks went on a tear. Between November ’08 and January ’09, many of our BIG GOLD picks made substantial gains, rising anywhere from 45% to 149%.

This good news isn’t the whole story, of course; many mining stocks saw percentage losses greater than the broader market averages during the Big Selloff. But given the fact that gold stocks started rebounding while the broader markets continued lower, the BIG GOLD portfolio ended the year down 24% while the S&P lost 38%. We were also glad to see our portfolio responded better than the HUI; the broad-based mining index lost 32% on the year. Meanwhile, the demand for physical gold and silver was surging, likely attributed to investors who’d been spooked by the broad meltdown.

We held on to our shares throughout the selloff and advised our readers to do the same – and subsequently watched our stocks rebound mightily. And we fully expect these kinds of surges to repeat as gold pushes higher. Keep in mind that the real mania is yet to come. Once inflation responds to the Federal Reserve’s ongoing monetary foolishness, gold will need a space suit and our miners oxygen masks.

A key point to remember going forward is that gold mining shares constitute a minute fraction of the global equities market, and a small shift in investor interest toward our sector can move gold stocks sharply higher in a big hurry. The market cap of the fifteen largest gold producers in the world — combined — is a paltry $125 billion. That’s barely more than a single company such as General Electric, at $116B; much less than Microsoft ($175B); and waaay less than Exxon Mobil at $400B.

Miners have also had a temporary respite from high energy costs due to the collapse in the price of crude oil. Energy is one of the biggest expenses a miner has to carry. As energy prices came down, the cost of producing gold also declined, fattening the bottom line. Oil is likely to get back to and then beyond $143 per barrel at some point, but not for a while. We doubt it will top $75 this year, which is enormously helpful for our companies.

Recently, gold stocks have outperformed bullion, a trend we’re keeping an eye on and one we’re confident will continue in the future, especially when we see the certain emergence of serious inflation and the dollar resumes its downtrend.

So… what to do now?

What we hope you’ve been doing all along. Our general rules: If you’re already fully committed to this sector, stay the course; you will be well rewarded.

For those with money still to invest, accumulate well-run, sound companies on weakness. Volatility will continue; we expect days and weeks marked by retracement in the prices of even the best companies. The dips will be your buying opportunities. Place below-market bids and let the price come to you. Take positions with half or so of the funds you’ve allotted for this sector, then fill out your portfolio with whatever bargains come your way.

Whether you’re already full-up with gold stocks or are just getting started, you should be well positioned before the all-out mania for gold stocks hits.

The Quandary of Timing

It may surprise some to hear that we are not “all-in” yet with our portfolio. Why? Because our attitude is one of caution, and because we know that our big gains since October could get clawed back, partly or wholly, by another reversal – which would lead to another buying opportunity we wouldn’t want to miss.

But caution can be expensive when the market runs away from you. What if the train has already left the station? In that case, those waiting on a pullback will be disappointed. Just as all below-market bids placed on October 28 of last year went unfilled, so could today’s, or tomorrow’s.

Looking as little as a year out, our money is confidently on our stocks going higher – much higher. We expect the government’s assorted “stimulus” packages to fail to deliver as advertised, and usher in high inflation. This will push gold and gold stocks much higher.

But the question is, if the broader markets head lower, will gold stocks follow them down or ride on gold’s coattails?

That question leaves you in a quandary only if you’re looking at the short term. Or if you get emotional about this stuff. Those with no stomach left after the gut-wrenching selloff into last October probably shouldn’t deviate from the cautious strategy outlined above. If you’re one of those who see the big picture and ignore the gyrations along the way – which is what Doug Casey does – then you’re drawn to the idea of placing a bet when you judge that the odds are in your favor. It’s when you see the price of something is far less than its value that you can have the confidence to load up, whether that’s today or perhaps later this summer.

Whether you buy today or wait in hopes of a pullback, we believe you’ll be looking at profits a year from now. In the big picture, our stocks are still deeply undervalued, even after so many of them have doubled off their lows. But could they retreat again? In a general market pullback, definitely. Could they tread water for a while? Certainly. And could they leave present levels in the dust and double again from here? Absolutely.

There are times when one must put away the crystal ball and simply prepare for more than one scenario. This is one of them. Whether you respond more conservatively or more aggressively, keep your eye on the endgame. We think you’ll be glad you did.

Prudent precious metals strategies for conservative investors – that’s what BIG GOLD is all about. And now that the gold price is going up again, you shouldn’t wait to jump on the bandwagon. Read in our latest report why super-low interest rates mean we could see $1,500/oz gold this year – click here to learn more.

Source: Gold Stocks – the Best Strategy for Portfolio Building

We’re about eight years into the bull market, and gold has breached the $1,000 level twice and has spent weeks trading above the old high of $850. Some observers are now saying that gold’s pretty much had its day and that once the recession is over, it will retreat for good.

However, the four-digit gold price we’ve seen so far is with no price inflation to speak of, no effects of the atrocious increase in the money supply, and despite a rising dollar. What happens to gold when each of those pictures gets turned upside down – high inflation, excess cash jolting the economy, and a falling dollar? After all, gold’s performance to date has been powered only by general anxiety, not by any visible erosion in the dollar’s value.

I decided to take a fresh look at calculations that could be used to appraise gold’s upside potential. No one of them, by itself, comes with compelling logic. But they all point in the same direction.

Gold’s Percentage Rise in the Last Bull Market: What if gold in this bull market repeats the percentage rise in the last bull market? In the 1970s gold rose from $35 to $850, a factor of 24.28. Our low in 2001 was $255.95. Multiply that by 24.28 and you get a gold price of $6,214 per ounce.

U.S. Gold Holdings to Money Supply: The M1 money supply consists of currency and checkable deposits. The U.S. government currently holds 286.9 million ounces of gold. If the government were to make each dollar redeemable by the amount of gold it possesses, we’d arrive at the following price for gold: $1.569 trillion ÷ 286.9 million oz. = $5,468.80 per ounce

Gold/Dow Ratio: The ratio was about “1” when gold peaked in 1980, meaning the Dow and gold were the same price. To restore that relationship at today’s stock prices would mean when the Dow is at 6,626, gold should be at $6,626/oz. Of course, we think it likely that the Dow will get a lot lower before gold peaks. But even if it drops all the way to 4,000, that would imply a gold price of $4,000/oz.

All the Money in the World vs. Gold Reserves: If the public eventually sees the paper game being run by the central banks for what it is, governments will be forced to back their currencies with gold (and perhaps other tangibles like silver). Assuming they had to go into the market and buy the gold needed to restore faith in their currencies, the numbers might look like this: Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price.

U.S. Gold Holdings to U.S. Foreign Trade Deficit: The size of a country’s deficit or surplus would be of no consequence if all currencies were convertible into a fixed amount of gold. However, the dollar is increasingly considered a hot potato, and when the trade balance reverses, as it must, dollars will flow back to the U.S. and fuel domestic price inflation. Based on the cumulative trade deficit of $9.13 trillion (up from $6 trillion since June ‘07!) and U.S. gold holdings of 286.9 million ounces, the corresponding price of gold would be $31,822 per ounce.

U.S. Gold to U.S. Government Liabilities: Finally, the GAO (Government Accountability Office) calculates an income statement and balance sheet for the U.S. government. As you’d suspect, it is dominated by future liabilities for Medicare and Social Security. What if they had to be backed by the supply of gold? Official U.S. government liabilities now ring in at an incredible $55.2 trillion. To make good on that would require a $192,401 gold price.

No, we don’t think gold will hit $192,000 or even $32,000. And there really isn’t any surefire way to forecast the eventual high. But it’s clear that every weathervane is pointing in the same direction. So, yes, gold isn’t going to $2,000; it’s going higher.

When determining how to keep your wealth safe, the state of global affairs can be a powerful reminder that gold should be part of the strategy. And today our world, essentially, is on fire.

- Eastern Europe borders on bankruptcy. Brazil’s economy is falling off a cliff. Ditto Mexico.

- Protests have erupted in Latvia, Chile, Greece, Bulgaria, Iceland, Dublin, and parts of the U.S. Workers have gone on strike in Britain and France.

- In the U.S., 36 states and the District of Columbia have proposed or implemented reductions in the civil workforce. (You think customer service is poor now…)

- An astounding one in nine homes, 14 million, sits empty in the U.S. The December median price of a home sold in Detroit was $7,500. More than 8.3 million homeowners were upside down on their mortgage in the fourth quarter. Freddie Mac’s new CEO resigned after six months on the job.

- Last quarter, 12 U.S. banks failed, bringing the 2008 total to 25, the highest one-year death rate since 50 failed in 1993. More foreboding, another 252 banks joined the FDIC’s “problem list.” So far this year, 19 banks have failed.

- The central bank of Ukraine banned the early redemption of term deposits, the most popular form of savings in the country. Bank deposits have dropped 20% since September, as bank customers dodge the risk of getting locked in.

- The projected US$1.75 trillion federal budget deficit is almost four times the nation’s previous record-high budget deficit. The Times Square debt clock reads over $11 trillion. Japan’s now reads $7.8 trillion.

- High unemployment has become a worldwide epidemic, with the infection spreading.

- With world economies taking it on the chin, it’s little wonder that investor interest in gold as a safe haven is growing – a trend we expect to continue. And just wait until the dollar resumes its slide, the expanding money supply jolts the real economy, and inflation kicks in.

Given the ongoing turmoil and the swallowing darkness at the end of the crumbling economic tunnel, our recommended strategy here at BIG GOLD remains keeping one-third in cash, one-third in physical gold, and one-third in our selected gold stocks. New money for investment should be split among the same three categories; we just don’t see any safer places to be.

As economies around the world continue to shrink and governments continue administering larger doses of the wrong medicine, we’ll sit in relative comfort with our gold for protection and our stocks for profit. We expect the prices of both to rise as others join us.

Regards,

Jeff Clark

Source: Global Economics On Tilt – How To Protect Your Assets

Some observers are now saying that gold’s pretty much had its day and that once the recession is over, it will retreat for good.

However, the four-digit gold price we’ve seen so far is with no price inflation to speak of, no effects of the atrocious increase in the money supply, and despite a rising dollar. What happens to gold when each of those pictures gets turned upside down – high inflation, excess cash jolting the economy, and a falling dollar? After all, gold’s performance to date has been powered only by general anxiety, not by any visible erosion in the dollar’s value.

I decided to take a fresh look at calculations that could be used to appraise gold’s upside potential. No one of them, by itself, comes with compelling logic. But they all point in the same direction.

Gold’s Percentage Rise in the Last Bull Market. What if gold in this bull market repeats the percentage rise in the last bull market? In the 1970s gold rose from $35 to $850, a factor of 24.28. Our low in 2001 was $255.95. Multiply that by 24.28 and you get a gold price of $6,214 per ounce.

U.S. Gold Holdings to Money Supply: The M1 money supply consists of currency and checkable deposits. The U.S. government currently holds 286.9 million ounces of gold. If the government were to make each dollar redeemable by the amount of gold it possesses, we’d arrive at the following price for gold: $1.569 trillion ÷ 286.9 million oz. = $5,468.80 per ounce

Gold/Dow Ratio: The ratio was about “1” when gold peaked in 1980, meaning the Dow and gold were the same price. To restore that relationship at today’s stock prices would mean when the Dow is at 6,626, gold should be at $6,626/oz. Of course, we think it likely that the Dow will get a lot lower before gold peaks. But even if it drops all the way to 4,000, that would imply a gold price of $4,000/oz.

All the Money in the World vs. Gold Reserves: If the public eventually sees the paper game being run by the central banks for what it is, governments will be forced to back their currencies with gold (and perhaps other tangibles like silver). Assuming they had to go into the market and buy the gold needed to restore faith in their currencies, the numbers might look like this: Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price.

U.S. Gold Holdings to U.S. Foreign Trade Deficit: The size of a country’s deficit or surplus would be of no consequence if all currencies were convertible into a fixed amount of gold. However, the dollar is increasingly considered a hot potato, and when the trade balance reverses, as it must, dollars will flow back to the U.S. and fuel domestic price inflation. Based on the cumulative trade deficit of $9.13 trillion (up from $6 trillion since June ‘07!) and U.S. gold holdings of 286.9 million ounces, the corresponding price of gold would be $31,822 per ounce.

U.S. Gold to U.S. Government Liabilities: Finally, the GAO (Government Accountability Office) calculates an income statement and balance sheet for the U.S. government. As you’d suspect, it is dominated by future liabilities for Medicare and Social Security. What if they had to be backed by the supply of gold? Official U.S. government liabilities now ring in at an incredible $55.2 trillion. To make good on that would require a $192,401 gold price.

No, we don’t think gold will hit $192,000 or even $32,000. And there really isn’t any surefire way to forecast the eventual high. But it’s clear that every weathervane is pointing in the same direction. So, yes, gold isn’t going to $2,000; it’s going higher.

Witness the Breakdown

When determining how to keep your wealth safe, the state of global affairs can be a powerful reminder that gold should be part of the strategy. And today our world, essentially, is on fire.
· Eastern Europe borders on bankruptcy. Brazil’s economy is falling off a cliff. Ditto Mexico.
· Protests have erupted in Latvia, Chile, Greece, Bulgaria, Iceland, Dublin, and parts of the U.S. Workers have gone on strike in Britain and France.
· In the U.S., 36 states and the District of Columbia have proposed or implemented reductions in the civil workforce. (You think customer service is poor now…)
· An astounding one in nine homes, 14 million, sits empty in the U.S. The December median price of a home sold in Detroit was $7,500. More than 8.3 million homeowners were upside down on their mortgage in the fourth quarter. Freddie Mac’s new CEO resigned after six months on the job.
· Last quarter, 12 U.S. banks failed, bringing the 2008 total to 25, the highest one-year death rate since 50 failed in 1993. More foreboding, another 252 banks joined the FDIC’s “problem list.” So far this year, 19 banks have failed.
· The central bank of Ukraine banned the early redemption of term deposits, the most popular form of savings in the country. Bank deposits have dropped 20% since September, as bank customers dodge the risk of getting locked in.
· The projected US$1.75 trillion federal budget deficit is almost four times the nation’s previous record-high budget deficit. The Times Square debt clock reads over $11 trillion. Japan’s now reads $7.8 trillion.
· High unemployment has become a worldwide epidemic, with the infection spreading.
With world economies taking it on the chin, it’s little wonder that investor interest in gold as a safe haven is growing – a trend we expect to continue. And just wait until the dollar resumes its slide, the expanding money supply jolts the real economy, and inflation kicks in.

Both Hands on the Wheel

Given the ongoing turmoil and the swallowing darkness at the end of the crumbling economic tunnel, our recommended BIG GOLD strategy remains keeping one-third in cash, one-third in physical gold, and one-third in our selected gold stocks. New money for investment should be split among the same three categories; we just don’t see any safer places to be.

As economies around the world continue to shrink and governments continue administering larger doses of the wrong medicine, we’ll sit in relative comfort with our gold for protection and our stocks for profit. We expect the prices of both to rise as others join us.

***

Even though some of the mainstream media are already popping the champagne, cheerfully pronouncing the end of the crisis, we beg to differ. The economic quagmire the U.S. and much of the developed world is in is far from over… so be right and sit tight, as we at Casey Research like to say. And find out how you can make the most out of gold as a safe-haven investment, by clicking here.

Source: Global Economics on Tilt – How to Protect Your Ass(ets)

Jeff Clark says this could be the buying opportunity of a lifetime. The Fed and US Treasury are flooding financial markets with trillions of dollars. This will eventually send inflation soaring and the greenback into a nosedive. And that’s when gold prices will skyrocket.

If gold returns to its 1980 inflation-adjusted level, it could mean a spot price upwards of $5,000 by 2012.

This from The Daily Reckoning:

“Gold Rockets Past $5,000 in Heavy Trading”

Jan. 21, 2012 (AP) For the fifteenth straight day, the price of gold rose on record-setting volume, reaching a milestone few believed possible just a few short years ago. Roaring inflation and a fading U.S. dollar, combined with the continuing stress and uncertainty of World War III, pushed gold past the psychological barrier of $5,000 (to gold bugs, the “Big Nickel”), to close at $5,108 per ounce. Gold is now up an astonishing 66% since December 31, matching its percentage ascent of January 1980.

“It was another peak day,” proclaimed an exhausted trader on the floor of the NYSE, whose daily order flow, he said, included hardly any gold stocks as recently as a year ago. “The orders for mining stocks and the bullion ETFs are pouring in so fast and in such large volume that the computers needed help from us humans on the trading floor.” Floor traders had been widely considered obsolete in 2008.

The excitement is thick and palpable in this bastion of capitalism, as each trader tries to scream louder than the next. Goaded by the fear of being left behind, gold buyers keep pouring in, and the price continues rocketing upward. “This is a once in a lifetime opportunity,” shouted an ecstatic floor broker, who admitted he had been slipping in orders for his own account.

Meanwhile, outside the exchange, worried-looking buyers formed long lines at coin shops around the city. Already swamped with orders, the shops became financial refugee centers when a rumor ignited that Congress was considering confiscating gold, something that hasn’t happened since 1933 under President Roosevelt. The rumor gained strength from last year’s imposition of exchange controls. Supposedly needed for national security reasons, they gave rise to the “northern gaucho,” a term used to describe Americans who risk jail time to slip dollars across the border into Canada.

More violence was reported in the coin shop lines again today. In Manhattan, one incident was so serious that a life-flight helicopter had to be called in when a women stabbed a man who reportedly had cut into the line and then tried to enter the shop without a ticket. E-tickets for coin shop entry are now required by a city ordinance, something many consider very Orwellian. Some bullion shops have gone a step further and placed armed guards at entrances, who are reportedly none too polite when frisking customers for weapons.

While most are stunned by the yellow metal’s price trajectory, the rise in gold stocks has been even more dizzying. In spite of the tremendous gains they have had in the past year, the influx of new, first-time buyers has not slowed. Given the small number of real gold and silver companies, the buying pressure is, as one gold bug noted, “equivalent to pushing the flow of Niagara Falls through a garden hose.”

As seemingly every investor has learned by now, gold stocks are leveraged to the price of gold. While the metal is up five-fold in the last three and a half years, many stocks are up ten- and even twenty-fold. But it is the Canadian juniors that have shown the greatest leverage; a few of the better-managed companies have given shareholders returns of 50-to-1 or better.

“Our recommended Canadian stocks are up an average of 1,000% over the past three years,” said well-known speculator Doug Casey, speaking to a reporter with the good luck to find him in a hotel elevator. “However, our better performers have returned 5,000% to date. Our biggest winner closed today at $101 per share; we first recommended it at 87 cents.

“Adjusted for inflation, gold is just now reaching its 1980 top,” explained Casey. “This is something we’ve been expecting for years.”

But joy for some is regret for others – especially those who sold in 2008, when the metal lost 23%. “I panicked during the sell-off that summer,” lamented an investor. “I went another direction with my money, and I can’t tell you how many times I’ve regretted it. I sold most of my gold stocks for a big loss that year. But what I really lost was all the future profits I threw away.”

Scares from a fleeting rise in the dollar and a whiff of deflation convinced much of the public to dump gold and gold shares back then. And yet, as Doug Casey commented, “That was the buying opportunity of a lifetime and the last time the train stopped at a station with a 3-digit gold number.”

The buying is not expected to stop anytime soon. Time magazine just announced that its lead story in its upcoming issue will be a chronicle of the gold bull market that started in 2001, with a front-cover picture of a gold bull stampeding outside a derelict NYSE building.

With the widespread bullish sentiment for gold, it came as a surprise when someone in the elevator jokingly asked Doug Casey if he was considering selling. Mr. Casey gave no answer but got out at the next floor and explained that he needed to put something together for his subscribers.

Source: Back from the Future: Gold in 2012

I’ll tell you what I told myself. When I saw a chart of gold’s mid-summer drop, it looked scary…

…then I told myself to take a longer look at gold’s history.

What I saw is that gold’s recent drop is a blip in the big picture. So I told myself, “Maybe you should relax a little.”

Then I thought about corrections in past gold bull markets. Compared to the historical record, does the recent sell-off look normal? Or is there something about it that suggests our gold bull market is over? Here’s what I found: past bull markets were interrupted by similar drops – and then they came roaring back.

And even within the current bull market, there have been other pullbacks similar to what we’ve just gone through. Gold dropped 21% in the summer of 2006 – but gained 45% by the end of 2007.

So I told myself, “Corrections, including large ones, are normal in bull markets. The sweet stuff is still ahead.”

But enough of charts. What we really want to know is, is the case for gold still intact, or have the fundamentals changed? And the answer, I believe, will give you some compelling things to say if the recent correction has left you arguing with yourself about buying gold.