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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Continues on its Exciting Climb Higher!

Commodities / Gold & Silver Mar 05, 2008 - 04:05 PM GMT

By: David_Vaughn

Commodities

Even the threatened IMF gold sells have failed to slow gold's momentum. Winter continues beating down on us providing colder and colder days here in the south. The mountains receive the snow but the Piedmont remains clear.

Well the last of the democratic nominations are winding up. How will gold be affected regardless of who enters the White House? Who ever enters the house on the hill will have no strategy except to continue the present course which is unabated money creation which in turn leads to greater inflation.


WASHINGTON — Consumer confidence plunged to the lowest since the onset of the Iraq war in 2003, while wholesale inflation surged to the highest yearly rate in a quarter-century, according to Tuesday reports offering fresh evidence the economy is teetering near recession. Also Tuesday, a closely watched index indicated U.S. home prices dropped 9% in the final quarter of 2007 from a year earlier. That's the steepest decline in the 20-year history of the S&P/Case-Shiller home price index. USA Today, 2-27-2008

And greater inflation all by itself leads to higher gold prices. There are so many negatives impacting our economy today that no one seems to be able to grab a handle on either one of them.

“The restaurant industry has fallen, and it can't get up. To add insult: The worst may be yet to come.Same-store sales are sliding. Commodity prices are climbing. Units are closing. Customers are dwindling. Some of the top names in all ends of dining are in pain, from Starbucks (SBUX) to Applebee's to The Cheesecake Factory (CAKE)."Whether or not the rest of the economy is in a recession, the restaurant industry certainly is," says Ron Paul, president of restaurant researcher Technomic.”The financial squeeze is hitting hardest at dinner. Dinner traffic fell 2% last year, says research giant NPD Group. Lunch is slowing, too, says Dave Jenkins, president of NPD's U.S. foodservice business.” "In the lifespan of casual dining, we haven't seen economic times like this," says Marc Buehler, CEO of Lone Star Steakhouse, which just closed 27 of 179 stores.” - USA TODAY, 3-3-2008

The biggest crisis I continue to observe is the destruction of the US dollar. Of course the European tourists love this because their Euro is stretched so much further.

"The recent string of U.S. data has been appalling and this is putting significant pressure on the dollar and supporting gold," said Mark O'Byrne, executive director at Gold and Silver Investments Ltd., in a note. On Wednesday, gold rose $12.10, or 1.3%, to end at $961.0 an ounce.” Market Watch, 2-28-2008

The consumer price index has dropped to a low of 75 as consumers lose more and more confidence in the economy. I believe the greatest shock to the American consumer is the destruction of his home as his personal bank and line of credit.

“U.S. home prices plummeted at the end of last year, and bank seizures of property nearly doubled in January, indicating that the housing slump is deepening. Home prices suffered their biggest fourth-quarter drop since 1991, the Office of Federal Housing Enterprise Oversight said. The S&P/Case-Shiller home-price index showed prices in 20 metro areas fell in December by the most on record. Repossessions rose 90% to 45,327 last month from the same period a year ago, RealtyTrac reported. "All the news we're getting is pretty dark," said Celia Chen, director of housing economics for Moody's Economy.com. "Prices will continue to fall for the rest of this year because increasing foreclosures in turn increase inventories." ABC New, 2-27-2008

Home prices are slipping across the nation and so many mortgage holders are watching their mortgage rate climb dramatically higher. Maybe that bigger hose with the three car garage wasn't worth it after all. This is the biggest shock to America now. The inability to consider their home as an investment that only climbed in one direction.

Jim Rogers “If I'm not making myself clear, let me say it, you're going to see exactly the same thing. You're going to see worse recession -- worse inflation, the dollar's going to go down even more than it did in the '70s. In the '70s, America was a creditor nation still, now we're the largest debtor nation in the history of the world. So you're going to see worse inflation and, ultimately, a worse recession because the dollar is going to be under serious attack”.

We keep hearing about the dollar and honestly I have no idea what the bottom will be. I can say with certainty that I don't think the bottom has been reached. Are you preparing for liftoff? Actually many would find that a dumb question since we are a little over 30 dollars from reaching and surpassing 1,000 dollars an ounce. I still do not believe this run up to be a simple rally. I believe what we are witnessing a commodity that has been artificially held down for over 20 years and is just now finding its true equilibrium. Long term I believe gold will climb higher still. Where it may eventually settle down at I have no clue. All I know is that right now it is climbing higher and higher. Personally, I think a lot of folks have become bored with gold. Where is the excitement anymore? It only goes up and refuses to be held down.

Think long term, always longer term. The price of gold in the short term will move in extremes in every direction but gold will be overall strong for the rest of this decade and beyond. It's not too late to invest in gold related equities to take advantage of their wealth generating attributes. We are living in the last days of cheap resources and cheap commodities. Gold Letter, Inc. reviews undervalued gold stocks poised to rise in this time of increasing demand.

Click here to order Gold Letter

Don't forget to email.

By David Vaughn
Gold Letter, Inc.
David4054@charter.net

© Copyright 2008, Gold Letter Inc.

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2008, Gold Letter Inc.

David Vaughn Archive

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