I dropped in on the Cambridge House gold show in Vancouver this weekend. It was busy. People were generally upbeat and felt smart about the bargains they loaded up on during the recent rout. It was then that I realized that one gold ratio would lead to lower gold bullion prices while leading gold shares higher.
Fears of deflation are overblown, says Ed Bugos. He refutes the use of the ‘velocity of money’ theory as a reason why prices are ‘destined’ to fall. While a bout of deflation is possible, we know that the Fed will do what it takes to re-inflate. And the real worry should be that it will probably succeed.
Ed Bugos examines the outlook for gold in the short and long term. The government’s spending binge is fundamentally bullish for gold via its impact on inflation and the US dollar. However, it could take time for these negative effects to emerge. And that means another short-term correction in gold remains possible.
Responding to growing concern about the quality of the Federal Reserve System’s assets, former Federal Reserve Governor Lyle Gramley told reporters last week that “You have to reckon with the fact that one of the Fed’s assets is gold certificates, which are priced, as I remember, at US$42 an ounce, and if we were to price them at market prices, the Fed’s leverage would look a lot less than it is now.”
Humor me. Let’s crunch those numbers.
Those gold certificates have a book value of about US$14 billion, if you include special drawing rights and coin holdings ($1.7 billion). Even if you revalued this inventory, it would still total less than $300 billion, or 12% ofthe Fed’s total assets. So far,…
Gold bulls are going to attempt to raid Comex’s vaults by forcing delivery on their December futures contracts TODAY. Who can tell how that will go? I can’t. But it’ll be interesting to watch.
The late November rally in gold prices wasn’t quite as spectacular as mid-September’s gain, but it was still impressive. There was good follow-through too, though the momentum softened as bulls knocked on resistance near $850.
Last week’s gold rally has fizzled out. But Ed Bugos says we could be in line for very bullish move. Outside of Japan, countries are inflating rapidly, which is extremely bearish for paper currency. And the supply and demand fundamentals of physical gold remain bullish.
The finger of blame for this crisis should be pointed at the Fed, says Ed Bugos. Its interventionist activities created an unsustainable bubble. A recession is just the process of correcting these mistakes. Worse still, Ed says the Fed’s current actions are proof that it is not about to change this approach. Expect more inflation, and a bull run in gold.
Gold bug Ed Bugos is sure of a bright future for the precious metal. He says the only real obstacle to a gold bull run is full monetary (not asset) deflation. And the way the Fed is expanding credit, this seems like an unlikely scenario. Ed says this means a boom in gold mining is just around the corner.
“The market exists to discover value,” says gold bug Ed Bugos. Right now, it’s betting on deflation. But Ed says the feds will succeed in reinflating the economy. This means the gold market will shrug off the deflation scare and recover soon. There are three strong reason why the Fed will fail to tighten money supply.
