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A Golden Opportunity?

May 25, 2009

After sitting on the sidelines for a couple of months now, gold appears to me to have decided to not drop into the $800 zone. I was “conflicted” 90 days ago about whether or not gold would back off before resuming its upward drive. The stock market was in the 6,000 area, the recession was the talk of the town, and Obama was sweet talking our enemies. All the kind of stuff that’s not helpful to gold. That was 90 days ago, this is Memorial Day!

Who Wants Cheaper Auto Insurance?

Now, we even have the Federal Reserve saying that inflation is bound to heat up. Well duh! Here are three events that tell me that gold may have hit bottom.

1-It’s not that inflation is going to increase but go through the roof. We’re looking at double digit inflation down the road. Read my lips: that’s 10% and above. Sound impossible? Hang around.

2-The Obama administration is printing so much money, bailing out so many corporations, and promising to do even more (can you say go deeper into debt) with a national health care program, that other governments are going to quit buying our financial instruments or only do so at a high interest rate.

3-Then there’s all that sweet-talking stuff that’s gone sour. North Korea has just said go to hell & tested a nuclear underground explosion. Israel flatly rejected Obama’s instructions regarding future settlements and an attack on Iran’s nuclear plants is a growing possibility.

Talk about unintended consequences!

If, and that’s a big IF, gold has hit bottom, then the question becomes how FAST will it rise? Depending upon the three events above and a half dozen other independent variables, gold could go to $1,500 by year end or more likely by the end of 2010. Getting back to the $1,000 level though should happen quickly, maybe even before summer officially arrives- June 21.

Gold thrives on an environment where there’s future uncertainty, rising inflation, the threat of war, and doubt about normal investment opportunities. Talk about a perect storm! :-)

Written by Ernie · Filed Under Gold News 

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