Dennis Gartman Abandon’s Ship on Gold

We now have a new website, InvestLetters.com

According to Bloomberg, Dennis Gartman, author of the $500/month Gartman Letter, said he is abandoning ship on his outlook for higher gold prices. He says he expects gold to rise in price today and he will sell on that rise.

Many have a lot of respect for Dennis as he is an early rising hard working analyst. It should be noted, however, that Dennis has had his good calls and his bad calls on gold. Dennis Gartman is one who likes to buy strength and sell weakness. Ordinarily that may be good advice, but when an asset is in a trading range that can also lead to buying the highs and selling the lows. Dennis has done that before on gold.

Perhaps he is right this time and gold will go lower. In fact, Paul Van Eden (Cranberry Research) made the comment a few weeks ago that gold could get knocked back to the low $800’s. That would not only make Paul Van Eden very happy, it would also make him a buyer. Due to gold’s phenomenal rise, Paul feels a good pullback would be very healthy.

If you are a trader, maybe you should follow Dennis’ advice and sell your gold. Of course, if it goes to the moon you’ll be left at the station staring at a faint glimmer of the caboose. And with a commodity so highly manipulated by heavy handed government forces anything can happen. That’s why I don’t recommend trading gold on a short term basis.

And I definitely would not feel comfortable with none at all in my portfolio. But then again, at $500/month per subscription, Dennis Gartman is not likely in need of selling gold to buy food anytime soon.

If you can afford $500/month trying to profit from short term trends, subscribe to the Gartman letter and sell your gold. I was a subscriber a few years ago for about 6 months and didn’t make a dime.

But if you feel like making large profits following a long term trend then I would suggest a much more affordable subscription to Big Gold and International Speculator. I have made some very good money indeed from both of these.

George Soros Predicts Most Serious Crisis Of Our Lifetime

Legendary billionaire George Soros has apparently made the statement that

“The whole world is facing a very serious financial crisis … I call it the most serious crisis of our lifetime [because the whole] financial system is seriously disrupted.”

Just because he is a billionaire doesn’t make George Soros right. And I certainly don’t think too much of the social policies he promotes. But Soros did make fools of some governments while making his billions in the currency markets, so you have to give him that – he ain’t stupid.

Of course, this is what Doug Casey of Casey Research has been saying for a long time. The U.S. Dollar is headed towards its true worth – zero. Whether Doug’s prediction for a “greater depression” pans out or not is yet to be seen. Actually, I wouldn’t be too disappointed if he turned out wrong on that one.

So what do you do to protect yourself? If I can plagiarize the Milk people – “Got Gold?”

Seriously, these are precarious times, not just for your family but for your portfolio. I highly recommend you start benefiting from the advice found in Big Gold and the International Speculator.

For those who feel that the U.S. may not be the best place to be, either temporarily or permanently, you should take a look at the publication written by a couple of globe trotting ex-CIA types – Without Borders.

You and your portfolio will be glad you did.

What to do with Physical Gold

Whether you own any physical gold or not, how do you store it? I have written before about discomfort many of us have with keeping it ourselves. And in case you didn’t know it, a U.S. safe deposit box is NOT a good idea.

Unless you have your own Fort Knox to store your gold, you may be looking elsewhere.

Turns out that there are excellent places in the U.S. to safely store gold, as well as foreign locales. The folks at Casey Research get asked this all the time, so it shouldn’t surprise you that the February edition of Without Borders had a special section (“the Pulse”) written to answer the very question about gold storage and transporting gold to foreign countries.

Take a no risk trial subscription to Without Borders and you can visit the archives to get this valuable report.
P.S. – I just attended a private briefing in Nassau, Bahamas where this very topic was discussed.

Gary North Says “Sell Gold”

So Is Now The Time to Buy Gold or Sell It?

Dr. Gary North is an Austrian Economist, and student of the great Ludwig Von Mises.

Gary North claims a perfect timing call when 2 weeks ago he suggested selling Gold (although keep your core holdings of physical Gold). His argument is that the Fed is actually contracting the money supply, which is deflationary, and that leads to lower Gold prices.

The Gold “Bubble” is popped

Dr. North further postulates that Gold was the one last bubble that Helo Ben had to pop, and pop it he did. North is suggesting that for every $50 drop in the price of Gold, you sell more.

Now I’m not here to give investment advice, let me make that clear up front.

And maybe Gary will turn out to be the genius here. But I’m not betting on it. Personally, I don’t think a 10% drop, in a HIGHLY MANIPULATED MARKET, with a quick 5% rebound, constitutes a bubble pop. In fact, I don’t think Gold – or Silver for that matter – are in anything even close to a bubble.

In point of fact, I would rather be BUYING every $50 down that the price of Gold goes, not selling.

When it comes to Gold stocks, Dr. North doesn’t want any part of them. That’s fine for him, he already has his fortune made and is of retirement age. And yes, Gold stocks are volatile. And in my experience, they can go down much faster than they go up. But physical Gold is really only for wealth preservation, not creation. The leverage of Gold stocks can, if you pick the right ones at the right times, create wealth.

That’s an important point so let me restate it. The RIGHT STOCKS at the RIGHT TIME.

Don’t expect to do that all on you’re little lonesome. Get help from those who know the business the best and actually travel the world putting their boots on the ground in some very out of the way places.

For a little less volatility, try a Risk Free Subscription to Big Gold.

For a bigger potential upside, with associated bigger volatility, try a Risk Free Subscription to International Speculator.

Both of these are from the experts at Casey Research, including the legendary Doug Casey himself.

Gold is going to the Moon!

Doug Casey: “Gold is Going to the Moon”

An interview with the editors of BIG GOLD, Casey Research

As part of our survey of expectations for gold in 2008, one of our BIG GOLD editors interviewed famous contrarian investor and Casey Research Chairman Doug Casey. Here’s his take on what’s to come.

BIG GOLD: Gold has passed its 1980 nominal high. Why do you think it’s breaking out now?

Doug Casey: The fact that gold has moved above its 1980 high is meaningful only in an academic way; today’s dollar is worth only a fraction of a 1980 dollar. From here on, it’s best to avoid thinking about anything just in terms of dollars. What’s developing now is likely to be the biggest monetary crisis of the past 100 years, potentially the biggest since the U.S. Civil War. This isn’t a prediction, just an appraisal of the tumultuous possibilities that are opening up. Americans are going to have to learn to think more like Argentines: if an Argentine tried to keep track of value in the local peso, he’d be bankrupt in 5 years.

BG: There are those who agree with you about a possible crisis but believe we’ll see deflation instead of inflation, or at least deflation before inflation.

DC: What we’re facing is a monumental monetary crisis that can take one of two forms. It can be deflationary, where billions and billions of dollars are wiped out through bankruptcies and defaults, and the remaining dollars become worth more as a result. Or it can be inflationary, where the world’s central banks keep dollar assets from being wiped out by supporting the issuance of debt — which is what they’re currently doing, by propping up failing banks and homeowners who can’t pay their mortgages. Those are your two alternatives. You can have either one – it’s really a flip of the coin as to which you get.

It’s also possible you can have both at the same time. You could have deflation in some areas of the economy, such as real estate, which is happening now, and inflation in other areas of the economy, where prices are going up, as with food and oil.

I’m of the opinion that government is so big and so powerful now, and the average person – idiotically – relies on it so heavily, that much higher inflation is inevitable. They’re certainly going to do their very best to keep a deflationary collapse from happening, because they all remember what it was like in the U.S. in the 1930s. Yet not too many people think about Germany’s inflationary collapse in the 1920s. It was much more unpleasant.

Inflation is the enemy of the person who works, saves and invests. But it’s the friend of the speculator.

BG: Why do you think gold stocks have lagged while gold has taken off?

DC: Gold stocks are a play on gold. But they’re also stocks. The best environment for them is when both gold and the general market are moving up, and lately the stock market has been problematical. People are going to panic into gold, because it’s cash – money in the most basic form. Gold stocks are not money; they’re speculative vehicles. And despite the strength in gold, the costs and risks of finding and building mines have gone up just as fast in the last couple of years. There’s no necessity for them to move in lockstep with gold itself. That said, I think gold stocks are really going to howl as gold goes into the Mania stage.

BG: The water in the pot is definitely getting hotter. Where do you think gold is going this year?

DC: Gold has been in a bull market since 2001. It’s gone up, on average, about 25% per year compounded, and there’s absolutely no reason the bull market should stop now. On the contrary, there’s every reason to believe that the gold bull market, having gone through its Stealth stage and still being in its Wall of Worry stage, is going to hit the Mania stage. To sell now would be to leave the big money on the table.

My best advice is, be right and sit tight. And that means staying long until you see a golden bull tearing apart the New York Stock Exchange on the front cover of Newsweek magazine, at which point it will be time to sell.

BG: What price do you think gold will hit in 2008?

DC: Strictly gazing through a crystal ball, I think it’s going over $1,200, no problem.

BG: What about the long-term price for gold?

DC: Just to reach its previous high in purchasing power, gold will have to go over $2,500 – probably more like $3,000 after you discount the phoniness in the government’s CPI numbers. But because this crisis is much more serious than the one in the late 1970s and early ‘80s and much more far-ranging, $3,000 is actually a fairly conservative number. I’ll say it again: gold is not just going through the roof, it’s going to the moon.

BG: What advice would you give to readers of Big Gold about how to invest in gold and gold stocks in the coming environment?

DC: The first thing is, you’ve got to have a lot of physical gold in the form of gold coins. Second, make sure a large chunk of those coins is outside the political jurisdiction where you live. If you live in the U.S., they’ve got to be outside the U.S. If you live in Canada, they’ve got to be outside Canada, and so forth. Third, gold stocks are definitely going to howl, so you definitely should have a good position in them.

As important as gold and gold stocks are, though, I suspect we’re going to see foreign exchange controls of some type or description in the years to come. That means if you don’t have assets outside your native country, you’re going to be caught like a lobster in a trap. I think it’s very important to diversify internationally. Buying foreign real estate is one prudent way to do so because, even though there’s been a worldwide property mania, there are still some places where property is very cheap, leaving plenty of upside. In addition, if you pick a locale where you’d like to live, you’ll have a comfortable place to wait things out – which is a serious plus, because I think things in the U.S. are going to get really ugly in the years to come. And most important, the government can’t make you repatriate foreign real estate.

BG: What if I don’t have the ability to buy real estate outside the country I live? I know you can have a foreign bank account and a safe deposit box, but I have to report those, so how does that help me?

DC: You have to report a bank account, but you don’t have to report a safe deposit box.

BG: What if I have over $10,000 of coins in that box?

DC: It doesn’t matter. It’s just like having a million dollars of foreign real estate – not reportable. Of course they can change these arbitrary laws – probably to make them more restrictive and invasive – at any time.

BG: Thanks, Doug, for the practical advice. Anything else you’d like to say to Big Gold readers?

DC: Hold on to your hat; you’re in for the ride of your life.

BIG GOLD is a monthly advisory from Casey Research, one of the nation’s oldest and most respected organizations providing unbiased research on natural resource investments.

BIG GOLD is designed for conservative investors looking for an easy and lower-risk way to participate in gold markets through producing and near-production precious metals companies, ETFs and mutual funds you can buy and sell through your favorite discount broker.

To learn how you can play the gold bull market without taking excessive risk, learn more about BIG GOLD and its unhesitant 3-month, 100% money-back guarantee by clicking here now.

 

Abolish the Fed? Ron Paul Says So

Is it time to return to the Gold Standard?

Dr. Ron Paul is again calling to abolish the Federal Reserve, calling them an illegal and immoral institution. The Fed is supposed to be bringing stable money, but instead they are really involved in price fixing.

Ron Paul points out that the Federal Reserve is not allowed in the Constitution and is therefore illegal. The fact that they literally create money out of nothing makes them nothing more than legalized counterfeiters. If you or I tried to do that we would be slammed in prison so fast it would make the F-22 Raptor look slow by comparison.

The Federal Reserves amounts to a “seductive tax on the middle class” in order to enlarge Government, says Ron Paul.

Find out how you can profit in today’s financial turmoil by Clicking Here.

Casey Research Global Inflation Survey

Please visit us at our new website, InvestLetters.com

Inflation Is Baked into the Cake

By David Galland and Casey Research

The word “inflation” covers two different concepts, and it’s important to keep them separate. One concept is monetary inflation, which is when the supply of money increases faster than the supply of goods and services. The other concept is price inflation, which is an increase in the overall level of prices for goods and services.

The relationship between the two is the relationship of cause and effect. Monetary inflation causes price inflation. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that is causing it. And so they tend to blame the producers of goods and services for higher prices — rather than the money-creating government that is the true culprit.

And make no mistake, as government spending continues on a steep ascent, piling up debt, there is no question that the government has to continue creating money like there’s no tomorrow. This situation is not unique to the U.S. Quite the opposite: the adoption of fiat monetary systems is now universal.

The results of over three decades of unhindered monetary creation are increasingly being felt in a rising tide of price inflation, whether it be the 7.4% increase in producer prices reported by the U.S. in the most recent quarter, or the news just out of China that consumer price inflation now tops 8% and is worsening… or, in the most extreme example, Zimbabwe, where the utter lack of restraint by an insane dictator now burdens that economy with an inflation rate of over 100,000% annually.

The Casey Research Global Inflation Survey

To get a better sense of things, Casey Research recently conducted a survey of the world’s top 30 economies, broken down on a region-by-region basis. The snapshot below offers a glimpse at the big picture.

Global Overview

January 2006- January 2008

(To receive the full 38-page report, click here)

Commodities on the Rise

Most pundits focus on commodities as a central culprit in today’s higher price inflation. Why are commodity prices rising? There are many reasons, most importantly: supply and demand fundamentals, speculation and a weakening U.S. dollar, the “universal currency” in which oil, gold and many other commodities are priced.

Of those factors, supply and demand and speculation are fairly fluid. Which is to say they can vary over time based on politics (a threat to cut off oil sales by Venezuela, a war in the Middle East, legislation favoring biofuel production) or for more technical reasons (power shortages impacting mining in South Africa, or the shutdown of the Gulf of Mexico during a hurricane). This relatively short-term variability largely neutralizes the value of these factors as predictors of future inflation. Simply put: who can know the unknowable?

Instead, we look to longer-term trends. In that regard, two are apparent. The first has to do with the concept of “peak” commodities. While it has been Marion King Hubbert’s theory of Peak Oil that has received the most attention, credible arguments can also be made for peak metal (the dearth of major new discoveries), and even peak food. While these arguments have merit, they were beyond the scope of our survey, other than noting them as potentially rising in significance over time.

The second long-term trend is, in our view, of immediate consequence and worth a more detailed discussion: per above, the limitations and risks inherent in the fiat monetary systems now in universal favor around the world. It is this fiat monetary regime – the attempt to manage monetary policy based on flexible guidelines, and without the anchor previously provided by a gold standard – that we believe is the single most important driver of the rising price inflation now apparent around the world.

Losing Control

Simply, while the central banks of a handful of countries are (just) managing to contain inflation through restrained monetary and fiscal policy, the vast majority are finding the task politically inexpedient and are losing control. While we may point with some well-deserved derision at Mr. Mugabe’s comedic attempts to paper over his inflation with yet more paper, all nations are currently making the same errors, albeit at differing levels of failure.

To understand this point, we share a simple but accurate way of thinking about inflation as the result of too much money chasing too few goods. On that front, the chart just below paints a picture of the largely unfettered global growth in money since the early 1970s plotted against industrial production, a proxy for “goods” in their many varieties.

That chart begins to get under the hood of the problem, but one further view is necessary to understand what happened in the early 1970s that unleashed the tidal wave of money. The chart below presents a ratio of the above two measures, and includes a marker indicating President Nixon’s canceling of the link between the U.S. dollar and gold in 1971 as the likely trigger. Once this anchor was removed, all that remained was a pure fiat monetary system.

While canceling the gold standard was a U.S. policy decision, its impact was felt around the world. That is because of the historic Bretton Woods agreement struck between representatives of over 40 countries in 1944, as World War II came to an end.

Leveraging its position as “last man standing” following the devastating war, the U.S. pushed forward a wide-ranging set of agreements — the net result being that, from that point forward, the U.S. dollar would be the de facto global reserve currency, with all the nations of the world pegging their currencies to the dollar. New institutions, including the International Monetary Fund and the International Bank for Reconstruction and Development, were fathered at Bretton Woods, but they were nothing more than enforcers for the new regime, ensuring that the other countries stayed in line, buying and selling dollars as needed to maintain a stable peg.

For its part, the U.S. guaranteed gold convertibility at $35 “forever.”

But as is inevitable when dealing with governments, “forever” really means “for as long as it is politically expedient.” When it became inconvenient, in the late 1960s when the French under Charles de Gaulle decided that they’d prefer to have the gold, Nixon canceled convertibility.

Once President Nixon canceled that convertibility, which took effect in 1971, the world’s central bankers, left with no other immediately obvious or more viable alternative, continued using the U.S. dollar as a key component of their reserves. It also continued to be used in international trade, to price globally traded commodities, such as oil. Yet the end of gold convertibility represented a fundamental change; from that point forward the creation of U.S. dollars and, by extension, all of the world’s currencies, was restrained by nothing more than political expediency.

It is our contention that the size of the politically motivated governmental spending, spending which has no “hard” limiting factor or defined discipline, will continue apace and, in fact, significantly worsen due to compounding interest on government borrowing and the coming wave of irrevocable social commitments – on Social Security and Medicare in the U.S., for example. Against the backdrop of a global fiat monetary regime, the only limitation to government spending is that which the politicians believe will be politically unacceptable to a population. This is, generally speaking, no real limitation at all, given that the public is now apathetic about, and numb to, the real world implications of large numbers.

Inflation: Baked in the Cake

In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our Global Inflation Survey, we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.

As investors, that keeps us focused on gold, the world’s longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies. This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening U.S. dollar, and is now affecting fiat currencies around the world, almost without exception.

Are we seeing the end of the experiment in fiat monetary systems? It’s too early to say one way or another, but it’s not too late to shift at least some percentage of your portfolio into gold and, for leverage, gold shares.

The above was excerpted from the Casey Research Global Inflation Survey. The full 38-page survey, which includes commentary by Casey Research Chairman Doug Casey and an interview on the inflation/deflation debate with Casey Research Chief Economist Bud Conrad, is available on request. Click here to request your copy now.

Gold Breaks the $1000 Barrier

Well, it finally happened. Gold broke the $1000 per ounce price barrier intraday, closing above $990 for the first time ever.

Keeping in mind that 7 years ago in 2001 Gold was trading at about $270 per ounce, this is quite a stunning achievement for what was touted then as a “barbarous relic”. For something dug out of the ground that pays no dividends (although you can lease it for profit as the big boys were doing back then) Gold has put in quite performance.

But is that performance over? Is the Gold Bull dead?

Only time will tell for sure, but it seems that the Federal Reserve is perfectly willing to sacrifice the U.S. Dollar on the altar of the economy as clearly shown by the new lows on the Dollar index.

Gold, Silver, Platinum, Palladium and other commodities are the most likely beneficiaries.

How can you profit, you ask? Simple. Try a risk free subscription to Big Gold to find out exactly what to buy and when to sell so that your portfolio can take a ride to the moon too.

Gold Stocks: Ready for Takeoff!

Get Ready – Here Come the Gold Stocks!

By David Galland

Casey Research

You’d have to be a monk living in isolated penury to miss the fact that gold is on a tear. Specifically, it has risen from $277.75 on January 4, 2002 to $950 last week, a gain of 242% in just over 6 years. Over the same period, the trembling S&P 500 is up an anemic 22%.

In a gold bull market, an investor would expect the profits on gold stocks to be a multiple of those to be had from bullion. That leverage comes from simple arithmetic: once a gold producer covers its production costs, then each 1% rise in the price of gold can translate into a 5%, 10% or even richer improvement in the bottom line. For a company such as Barrick, with 125 million ounces in proven and probable reserves, even a $1 per ounce increase in the price of gold can mean big money.

And so we see that between January 2002 and last week, the gold stocks were in fact up 612%. So far, so good.

Yet, the gold stocks have stalled in recent months; between August 1, 2007 and February 21, 2008 gold bullion rose 42%, but gold stocks were up just 37%.

What’s going on? Is it that, in their concern over the broader equity markets, people have forgotten that gold stocks are associated with gold? Or is something else at work here?

The answer is “something else.”

The Mothball Years

While there are a number of plausible reasons for gold stocks lagging of late, we have come to the conclusion that the true explanation reaches much farther into the past. It’s that the managements of the gold producers have only recently escaped the state of fear they operated under during gold’s 20-year bear market.

Consider: as recently as the year 2002, gold was still trading near $280. Against that number was a cash cost of around $250 per ounce for a typical company. That cost figure is about as low as the number could go, and it was the response of an industry beaten down and huddling in a trench.

Caution lingers after the reason for it has gone. As gold began its upward move in 2002, it did so against the backdrop of an industry still in mothballs and still run by managers whose primary skills were cost cutting and frugality. This is important on a number of fronts.

1) Having been trained in the acid bath of razor-thin margins, management was intensely skeptical about gold’s rally. They suspected it might be just another bear market trap, ready to punish unwary optimists who parted with cash to ramp up production.

2) In the hunkered-down years, miners focused on the higher-grade, easy-to-mine material that gave them the best shot at turning a profit, however small that might be. And being in survival mode, they were extremely cautious about buying new equipment or maintaining a large workforce. Employee rosters were reduced to the bare minimum.

3) Because staying in business was such an urgent goal, they were willing, even eager, to sell future production at a set price — a perfectly rational strategy in a bear market, because it at least assured they would receive a price that covered the known costs.

With all these factors taken together, it’s easy to understand why the industry was slow to respond when gold started rising. In fact, it was only in February 2003, with gold trending over $350, that Barrick Gold Corp., the world’s largest gold miner, began the expensive process of unwinding its hedges. And it wasn’t until November of that year that the company announced it would stop forward selling altogether and would eliminate its entire hedge book.

Once the turning point came – when management finally realized the bull market was for real — the industry began to scramble to catch up. Which, in a choo-choo industry like mining, means hiring and training lots of people, buying or refurbishing the equipment needed to reestablish production on second-tier deposits, upgrading facilities, building expensive new mills, etc., etc. And, of course, dealing with the challenge and expense of unwinding hundreds of millions of dollars worth of forward hedge contracts.

The rebuilding of the gold mining industry, in short, really only began in earnest over the past few years.

The Ugly Duckling Years

As would be expected, the costs associated with rebuilding the industry sent big hits to the bottom line, resulting in the kind of ugly financial metrics that repel institutional investors.

The metrics were not at all helped by the shift away from high-grade ore, because the lower the grade, the more the material you have to dig, hoist, haul and process, meaning increased production costs. In addition, the industry rebuild occurred against a backdrop of generally rising inflation and a falling dollar, which helped push the cash cost of production up by more than double from the mothball years, keeping the miners unattractive as investments.

By contrast, the base metals companies, which had hit bottom earlier, near the end of 1998, had already emerged from the mothball stage, thanks to increasing demand from China and elsewhere. They were, as a result, well on the road to recovery when the big price increases for base metals kicked off in 2004. So, while the gold miners have been widely shunned as ugly ducklings in recent times, the base metals sector has been enjoying salad days, reflected in multi-billion mergers and acquisitions and, of course, sharply higher share prices.

The Golden Years

Here at Casey Research, we are of the firm opinion that, now that the biggest costs related to restarting their industry are behind them, the big gold companies are poised to take off. The proof should come in rapidly improving margins which, lo and behold, we have begun to see in the quarterly reports now being released.

Just last week, Goldcorp announced that fourth-quarter profit had nearly quadrupled over the same quarter the year before. And then Kinross announced that it, too, had posted a record quarter, with profits up almost three-fold over Q406. Meanwhile, Barrick reported that net profit for 2007 was 28% ahead of 2006. In addition, Barrick is feeling sufficiently flush (and optimistic) that it’s buying out Rio Tinto’s 40% interest in the Cortez Hills joint venture for $1.695 billion… cash.

And the exception to this picture of profit eggs finally hatching is only superficially an exception. Newmont announced a loss of $1.8 billion in 2007. But most of it came from a one-time house cleaning — $531 million to unwind 18.5 million ounces of forward gold sales and a $1.6 billion non-cash charge to terminate operations related to merchant banking. Look past those elements, which are an overdue recognition of money that went down the drain years ago, and you find that Newmont’s mining business is actually in a healthy position. Looked at from another angle, Newmont took these charges now because they could afford to do so and because they felt that the damage to their share price would be softened by the strong performance of their current operations. Now that they’ve cleaned up the books, they too are dressed up to join the profit party.

How to Profit

It won’t be long before others also note the pending improvements to the bottom lines of the big gold companies. The investment herd, we are convinced, is coming and, we expect, coming soon.

How to profit?

First and foremost, you want to be moving into the established producing companies post haste. The gangway on this ship is getting ready to be pulled up.

Secondly, you should seriously consider moving some funds into the higher-quality junior exploration stocks. History has proven that, absent an exciting discovery story, the big gold stocks must get in gear before investor sentiment can reach the critical mass needed to ignite the juniors.

History also shows that as profitable as the big gold companies are in a bull market, returns on the juniors can blow those away. Exponentially. This upside, of course, comes with a greater degree of risk.

But paradoxically, this risk has been largely mitigated by the majors’ slow take-off. That’s because, anticipating that the gold stocks would follow the metal higher – and history shows no example of them not doing so – investors have already poured record amounts of money into exploration programs. As a result, we now know which companies have the goods — significant discoveries that juniors have spent tens of millions to define and prove up with the clear intent of selling to the majors.

The missing element, of course, has been that, until recently, the majors didn’t have enough free cash to make those acquisitions. That is about to change.

While you don’t know me and so will have to take my word for it, I am not the type of person to fall in love with any investment. And any time I feel such an urge coming on, I check all my assumptions twice and then check them again. That said, I will also say that I have never been more bullish than I am now on the gold mining sector as a whole, with an added nod to the well-run exploration companies.

David Galland is the managing director of Casey Research, publishers of Doug Casey’s monthly International Speculator advisory. For over 27 years Doug Casey and the Casey Research team have provided self-directed investors with unbiased research on investments with the potential to provide double- and triple-digit returns by tapping into evolving economic and investment trends ahead of the crowd.

To learn about the International Speculator and how you can try it free of risk with an unhesitant 3-month, 100% money-back guarantee click here now.

Are We Headed Into A Recession?

President George W. Bush: “The U.S. is not headed into a recession”

You all know I hate to be a party pooper, but let’s look at what the President DIDN’T say:

• He didn’t say we weren’t already in a recession – I think we are
• And he didn’t say we weren’t headed into a depression – I’m not saying we are

Let’s remember the definitions:

An economic downturn is when you hear about people losing their jobs.

A recession is when your neighbor loses his job.

A depression is when you lose your job!

Let’s remember that when President Bush loses his job next January he will have a nice pension and Secret Service for life. Not to mention the honorariums from speeches – although I’m not sure who would pay him $100,000 to speak, but they’re probably out there.

And those economists with all of the reasons we aren’t headed into a recession aren’t in danger of losing their jobs either, although they would be if I had any say in it.

Enough pleasantries, what does this mean for Gold?

Well, let’s look at this comment from this mornings “Casey’s Daily Resource Plus“:

The key element to note there is probably that gold notched a record high in Europe. Though many analysts are suggesting that the weakening dollar is largely responsible for gold’s runup, the fact of the matter is that the metal has been rising against currencies worldwide, in some instances even faster than in the U.S.

People’s aversion to paper is not just an American phenomenon any more. From the mid-summer trough last year, gold is up about 40% against the British pound, 35% against the euro, 25% against the Japanese yen, and 35% against the renminbi.

We don’t know where this trend is heading, but we do know what’s driving it. Paper is paper, and gold is gold.

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