Gold rose $3 yesterday…climbing back towards $900. Many gold investors are worried that the end of the Fed’s rate cuts also means the end of gold’s bull market – at least for the near term.
We don’t think so.
Rate cuts, more loans, rebate checks, money supply increases – it all adds up to higher rates of inflation. And there’s no Paul Volcker on the horizon to stop it.
Here’s the way our friends at Doug Casey’s ‘Big Gold’ report see it:
“So what happened? Is the bull market over, or is it intact?
“We are confident the bull market in gold is not over. There is simply too much pressure for higher inflation and a weaker dollar for gold not to rise. A dreadful day (or week or month, or even a season) for gold doesn’t drain out the bad stuff that’s been simmering in the economic cauldron. The Federal Reserve hasn’t stopped printing money (in fact, it’s picked up the pace); the U.S. government hasn’t balanced its budget (in fact, the ‘stimulus package’ is making the deficit worse); and the dollar’s foreign exchange value hasn’t fallen nearly enough to cure the U.S. economy’s enormous trade deficit. In short, we don’t share the sentiment that all is better in the U.S. economic and financial systems.
“It’s our opinion that gold’s downturn and the corresponding easing of worries about the financial system are temporary. How long ‘temporary’ will continue is unknown, but events always trump psychology at some point. First we will see investors return to gold – and then we’ll see newcomers fleeing toward it.”
Markets and Money