Gold At Cost

Lear Capital: 3 Reasons Gold Is Headed Higher

Tuesday, January 3, 2012 by David Engstrom

Where is the gold price headed from here? As we wound down 2011, gold prices slipped to multi-week lows. As prices slipped, reports again flooded the airwaves extolling the death of the gold bull market. As the New Year now rolls in, and year-end profit taking concludes, prices are ticking higher along with the price of silver, palladium and platinum. I personally think the death of the gold bull market has been greatly exaggerated. Perhaps you will agree.

First, I don't believe Central Banks of the world have been increasing their stockpiles of gold because they expect the price to go down. Think about it. Those who have the ability to print money and indeed are likely to be called on to do so, are buying gold. Let's face it, even a report that a major bank is considering printing more money can affect the markets. Conversely, so can a report that says more printed money is not an option. Yes, this suggests short term manipulation of the markets is possible. However, that's exactly what it is - short term!

Incidentally, it also makes better news to report from one extreme to the other. I recall, when gold hit the $1900 per ounce level, reports of $5,000 gold made TV headlines. Not two months later, those reports were replaced with reports of $1200 gold ahead. It's always curious to me how, regardless of what the prediction of the day may be, the TV anchors, or their special guests always seem to be able to make sense of it. Let me ask, how many times you have heard in the mainstream media that central banks are buying gold by the hundreds of tonnes. Need I say more?

Secondly, all the metals are moving in unison. It makes no sense that an anticipation of better economic times or a stronger dollar would drive all precious metals prices down. If economic recovery really is in motion, the industrial metals should be moving higher in anticipation of increased industrial activity and demand for those metals. It's one thing to say gold has lost its safe haven status but to the extent that status is lost, it would be because true economic recovery is underway. In that case, industrial metals would separate themselves from gold and rise accordingly. That was not occurring at the end of 2011 and it is not the case as we launch into the new year.

Finally, geopolitical unrest is reaching a new crescendo. Iran is just begging for conflict. If they do not follow through with their threat to close down the Straits, they still flirt with retaliation for their nuclear activity. Either way the world oil supply is held hostage and any disruption in the power base in Iran is sure to bear on the world economy.

I'm often asked, why then has the price of gold dipped to these current lows? You have to admit, gold has had a great run and it is hard to maintain that momentum when all the news points to some kind of recovery. As the saying goes, repeat something often enough and it becomes truth.

So, as I have said numerous times, if you believe there will be no more money printing, that we are in economic recovery, that 2012 will see world peace then don't buy into any story that suggests gold prices will resume their march higher. If you believe the greatest challenges this country has ever seen still lie ahead, equip yourself with the means to protect against failing currencies, inflation and an amount of debt that can never be repaid. Information is key and it costs nothing to visit LearCapital.com for the latest breaking news on gold, silver and the economy.

Gold has always been the hedge against this kind of uncertainty and I doubt 5000 years of history will be wiped out with a few news reports that everything is going to be OK! Frankly, if gold were half the price it is now it would only be for the reason that millions more of my friends and neighbors would have jobs, real estate prices would be in recovery and my kids would not be stuck with the consequences of repaying a debt that looks more and more like it will never be repaid.

Lear Capital: Does the Gold Price Make Sense?

Monday, November 21, 2011 by David Engstrom

Central banks are buying more than ever and producers claim it is more costly than ever to get out of the ground, yet the gold price continues to slip lower.

According to World Gold Council Reports, "central-bank gold purchases in the third quarter more than doubled from the second quarter and were almost seven times higher than a year earlier as countries continued to diversify reserves." Last June, Standard Chartered released results of a survey of more than 300 producers, and determined that future supply of gold would fall well short of levels previously anticipated.

These facts alone should be enough to drive gold prices to even higher highs. Instead, it appears the gold price is headed toward lower levels of support. Some suggest a level around the 150 day moving average of $1605 an ounce, will be reached.

So, how do we explain the recent gold price action? First, realize gold prices, even at $1605 an ounce, would still represent a 20% gain on the year. Stocks, on the other hand, are negative for the year with the S&P leading the way down with more than a 6% loss at today's current trading level. Adding this to the equation may explain one reason gold is selling off. It's one of very few assets that can be sold for a profit.

Let me give you an uber simple example of what could be taking place. Let's use a $100,000 portfolio to make it easy to illustrate. Then, let's say I started the year with 80% of my portfolio in stocks and 20% diversified into gold. That's $80,000 and $20,000 respectively. If my stocks are down 5%, and I see a further decline ahead and sell, I have lost $4000 on the year. My gold, on the other hand, up at least 20%, would provide me with a $4,000 gain. This means I can sell my gold for perhaps zero tax consequence as gold gains offset my stock losses.

Yes, this is a very simple illustration with many variables. So simple it may seem inconsequential but when you multiply the amounts in play and consider trillions of dollar in invested money, you can see how important it could be for many investors to sell metals, essentially tax free now, to offset other losses.

This would be especially true if stock investors see even greater losses ahead. Why wait around when losses could mount to levels so high, a complete tax write-off may never take place.

Are greater market losses coming? In a November 17, article, Jim Cramer, warns us that Europe could be a total disaster, driving the Dow down to 8000. Now, I believe things get a little clearer. If everyone who owns stocks and gold is compelled to sell, first to avoid further market losses and secondly, to effectively take tax-free metals profits, that could explain a joint sell-off.

If this be the case, the next question is, how long can this go on. It is estimated that of the total of investable money out there, still only 1% of that amount is held in gold or precious metals. There just isn't enough precious metals in portfolios to facilitate a prolonged sell-off in stocks even if every ounce of gold had to be sold to cover stock losses.

I'm not suggesting this is the only reason people are selling off precious metals. I do think much of the selling, though, is profit motivated and voluntary. But, let's face it, others are being forced to sell. It could be to cover margin calls or simply because times are tough and money is needed. I don't think I need to remind you, but we are still in the midst of a recession and Christmas is coming.

Whatever reasons exist for selling, the reasons for owning should be equally as strong, perhaps more so. Central banks aren't buying tonnes of gold because they think the price is going down. It's a currency play. I mean how much can you love anyone's currency when all you have to do is print more when it runs out?

If you are one of the few that is fortunate enough to have money to invest, now may be the last best chance you have to add some gold to your savings and retirement accounts. Remember you can add gold or silver to an IRA. When it is held in an IRA it is treated, tax-wise, the same way as any other investment.

And if you want to track where the gold price is headed from here, get the blockbuster video, The End Of The Dollar to learn more. Does this all make sense now? I welcome your comments.

Lear Capital Article Review: The Real Reason for the Uprisings (hint – it’s inflation!)

Sunday, October 23, 2011 by Eric Harding

Blog photo Gary Gibson who writes for Whiskey and Gunpowder wrote today about the economic problems and what he views as the reason for the uprisings we see. His take:

“And what exactly is causing our economic problems? In short: inflation. Both the creation of new money unbacked by productive activity — literally, conjured up from nothing at the whim of a central banker — and the artificially low cost of borrowing to expand the amount of debt…again, thanks to central bankers buying government debt with the money they create in order to shove interest rates down.”

AND:

“In other words, inflation is causing the things that have people revolting in the streets.”

This was predictable. Class, what is our best antidote to inflation for your portfolio? Safe haven gold! Numismatic gold and numismatic silver can give you peace of mind at such a time. From Lear Capital – of course!

Lear Capital: 101 Reasons Not to Own Gold . . .

Friday, July 15, 2011 by David Engstrom

. . . and I don't know any of them!

From time to time I read something written by a person who does not believe gold is money or has value. A couple comments lately struck me as particularly funny. One writer said if gold was so valuable, why would anyone sell it? Why wouldn't they just keep the gold to begin with?

I read it and I thought, "you don't get it, people are keeping it - that's why the price is going up." Why do you think gold has gone from $270 an ounce 10 years ago to $1500 plus an ounce today? People acquired it and don't want to sell it until they can get a meaningful number of dollars for it.

What do I mean by "meaningful?" Meaningful could be that gold is now worth so many dollars that one can cash in gold to pay off a house bought 10 years ago. It just so happens most homes, after a decade of greed-driven lending practices and a housing crash are, once again, worth just what they were 10 years ago. But, since some homeowners were diligent and put extra money in gold over the years, their gold is now worth many times the dollars originally paid. Lord knows when you adjust for inflation, stocks have probably gone down in value and so have bonds. Not gold, though. And now those who sell only sell because they held out long enough to do something meaningful with the dollars they get in return.

Another comment I read stated that the only real money is food and if you want to prepare for some kind of crisis, you should have food, personal hygiene products and essential paper products. Yes, I think it is prudent to have some emergency supplies, in case Yellowstone erupts, but how many band aids and rolls of toilet paper can one get in even a large safety deposit box. And, how much of our savings and retirement should be kept in rolls of Bounty and Dial soap.

This particular writer was also good at math saying that today a $1500 ounce of gold would buy 500 chickens and that if there was a food shortage, those chickens could produce 500 eggs a day. Wouldn't my neighbors in suburbia love that. You just buy them as little chicks and pretty soon they are chickens laying eggs. They don't eat, they don't stink nor do they get eaten by the circling owls, eagles and prowling foxes. You just buy them and then they grow up and lay an egg. Something that writer was good at.

Finally, perhaps the comment I hear most often is that gold is so hard to store and costly to ship. While I don't really recommend it, the cost of postage for a one ounce letter is 44 cents. What weighs more - an ounce of gold or a one ounce letter? And, as far as storage? Well, you can fit about $200,000 worth of gold in a soup can. In fact, did you know one cubic foot of gold weighs about 1200 pounds? At a cool $25 million or so, I think you could find one cubic foot of space to store your gold.

Funny, I always looked at gold as portable wealth. An ounce of gold in your pocket is like carrying around 15 barrels of oil. Try and store that until you retire. The same goes for food. Of course we need to eat and you can't eat gold, but you can't store a lifetime's worth of wheat, apples and corn flakes in your IRA either.

For 5000 years gold has been an effective store of wealth and right now gold demand is such that anyone who does own gold does not want to sell. Central banks are buyers, governments are buyers, as well as the most prominent investors of the world. Why else would the gold price be on the verge of breaking through $1600 an ounce?

Finally, to all of those who know the 101 reasons not to own gold, I have one question. Are they the same reasons you decided not to own gold 10 years ago?

While CNBC is saying Bon Voyage to QE II, YOUR central bank is happy it made YOUR currency weaker!

Friday, July 1, 2011 by Eric Harding

Blog photo As an investor, you should WANT your own home currency to be strong. A strong currency helps you to plan for a future without inflation, without a potential debasement of your money. Well, it looks like you are not going to get it. You see, the President of the St. Louis Federal Reserve said yesterday at a conference on Quantitative Easing that a desired weaker dollar has been achieved. His words, right from the St. Louis Fed’s website:

“In reality QE 2 worked. In particular, real interest rates declined, inflation expectations rose, the dollar depreciated, and equity prices rose, ….”

I’m sorry Mr. Bullard, but if you are stating that QE 2 was a success as it weakened our dollar, I’m going to vote with my feet and invest in physical gold. I’m going to buy gold with those dollars as I look for a safe haven from your policies. Annual gold production can’t rise fast enough to stem the tide of a policy that is happy with your currency becoming weaker. Before you see the gold coin cost rise further, call us at Lear Capital!

Concerned Voices, and a Guess at What the Next Financial Crisis Dominos-to-the-Ground Looks Like

Tuesday, June 21, 2011 by Eric Harding

Blog Photo Per Agora Financial’s 5 Minute Forecast last Friday: “The number of voices concerned about a new financial crisis grows...

“You should be scared,” says Neil Barofsky, who was inspector general of the $700 billion TARP program to bail out the banks until last spring. “I am scared.”

“You can’t not be scared,” he tells Dan Rather in a new interview. “You can’t look at what happened in the run-up to 2008 and see how it is not going to repeat itself, given what we have done.”

Also, here is how they think the dominos are going to fall:

“So we have a scenario that looks something like this:

Greece defaults
The market value of the French banks’ commercial paper is downgraded
Money market funds refuse to fund new issuances of that commercial paper
Suddenly, the French banks don’t have enough liquidity to meet their obligations
Meanwhile, European banks hit up U.S. banks for their credit default swaps, putting said U.S. banks, in Mr. Greenspan’s words, “up against the wall.”

Oy... There’s no news we see today that indicates this is close to being fixed before the European Central Bank’s self-imposed deadline of July 11.”

And, Barfosky (who in my opinion should know) said the following about the next crisis: “The largest banks are now 20% larger today than they were going into the crisis,” Barofsky told Corporate Crime Reporter last week. Standard and Poor’s “estimated that the upfront costs of another bailout could be up to $5 trillion.

“And when you think about the focus on our budget issues, our deficit and our debt — what happens with the next crisis and we have to come up with another $5 trillion to bail out our system once again?

“It’s a terrifying concept.”

As the folks of the 5 Minute Forecast say: “Oy”. Oy is right. And July 11^th is only 20 days away. Are you stacking your gold coins yet? I am. Gold supply and demand – that’s right! I’m demanding gold in my portfolio! Demand your gold coins today at Lear Capital !

Lear Capital Review: The Successful Failure of US Money Printing

Thursday, May 26, 2011 by Eric Harding

Blog Photo Bill Bonner of the Daily Reckoning never minces words. This is again one of those times. Here’s what he said today:

“Yes, dear reader, there are some options you’re better off without. Printing money – with nothing to back it – is one of those things.

But wait. You say the Fed’s money printing (otherwise known as QE2) has been a success? Think again. We’ve been saying for months that it won’t work. Now, even the mainstream press is catching on. Here’s the latest report from The Wall Street Journal (MarketWatch):

BOSTON (MarketWatch) – It’s cost $600 billion of your money. And it was supposed to rescue the economy. But has Ben Bernanke’s huge financial stimulus package, known as “Quantitative Easing 2,” actually worked as planned? QE2 is being wound down in the next few weeks. Fed Chairman Ben Bernanke has said it has left the economy “moving in the right direction.”

But an analysis of the real numbers tells a very different story.

Turns out the program has created maybe 700,000 full-time jobs – at a cost of around $850,000 each.

House prices are lower than before QE2 was launched. Economic growth is slower. Inflation is higher.

Yes, it’s sparked a massive boom on the stock market. Ordinary investors have started piling back into shares again. And last week we saw the latest example of the return of animal spirits on Wall Street, as stock in new dot-com LinkedIn skyrocketed on its debut.

But even the stock market boom hasn’t been what it appears. An analysis shows that most of the rise in the Standard & Poor’s 500 Index under QE2 has simply been a result of the decline in the dollar in which shares are measured.

The truth? QE2 has created a massive new bubble in dollar-based financial assets, from stocks to gold. Meanwhile, it has had zero visible effect on the real economy.

Take jobs. According to the US Labor Department, since last August the number of full-time workers has gone up by just 700,000, from 111.8 million to 112.5 million.

At a cost of $600 billion, that’s $850,000 a job.

The picture’s even more meager. Over the same period, the number of part-time workers has gone down by 600,000. In other words, we’ve basically shifted 600,000 or 700,000 workers from part-time jobs to full-time jobs.

The percentage of the population in work is actually lower today – 58.4%, compared to 58.5% last August. The percentage of the workforce in actual work, the so-called “participation rate,” has fallen by half a percentage point.

Some recovery.

Right. Some recovery.”

I’m in agreement with Bill. It’s not just a failure of money printing – it is a failure in money printing! I do disagree with the Market Watch writer on one point. Physical gold is not in a bubble. Paper money is in a bubble nearing a pop and physical gold and silver (real money) and their potential meteoric rise in value is a RESULT of the bursting of the paper money bubble. THAT must be understood! Like to discuss it further? Call us today at Lear Capital !

Lear Capital: Gold Confiscation Through Taxation?

Thursday, May 19, 2011 by David Engstrom

As budget battles rage, it's likely we will begin to hear more and more about some of the intricacies of the President's 2012 budget proposal. One such detail grabbed some attention months ago, then critics and pundits alike, temporarily put it aside. Now, the issue has resurfaced.

Within the proposal we find that President Obama would like to impose a new 5% royalty on gold mined from public land. The royalty, which is basically a fancy word for tax, would be paid to the taxpayer - in other words, collected by government. The argument in support of such is centered on the fact that royalties are collected on oil extracted from public land at a rate of 12.5% to 16.7% of the value of oil produced. So, why not collect it on metals too? Yesterday, a Fox News report put the amount at about $18 per barrel of oil.

The entire program is shrouded in controversy. Maybe this explains why it is cheaper to import oil than produce it ourselves. Who wants to be a partner of the U.S. Government in domestic drilling if it only means more tax and less profit.

Now, it appears, this will also be the fate of gold miners who extract gold from public land. Nevada produces about 80% of our gold and so it is Nevada mines will bear the greatest expense. If I had to speculate, I think the proposal will pass. Nevada and Harry Reid seem to be outnumbered on this one. It is projected that $3 billion will be collected over a 10 year period. Obviously, if gold prices rise, the amount of royalty/tax collected, would increase.

What will this do to the gold price? One would have to believe any added cost would be passed on to the consumer. Hence, the price of an ounce of gold would rise. Silver and copper are also targeted. Herein lies another argument against gold stocks and for physical gold. If mining costs go up profits go down.

If you already own gold, good for you. It could well be that pre-royalty gold is the bargain of the century. It's kind of like pre-confiscation gold back in 1933. If you were smart enough to keep your legal allotment of gold, once government confiscated the rest of it, those who kept some of the gold they owned prior to confiscation were rewarded with a 75% profit in dollar terms. Government took the gold at $20 an ounce and then once they possessed the majority of what existed, they raised the price to $35 an ounce. Clever eh?

Let's face it. A royalty is just another tax and taxes are a form of confiscation. So, it appears, the first step to confiscate gold has been taken. A baby step, perhaps, but a step nonetheless and yes the budget still has to pass. It's almost clever. If you tax future production you are basically laying claim to a portion of whatever is still in the ground. In turn that drives up the price of what you already own, that being our strategic reserves in Ft. Knox.

I have always found it intriguing that our central bank or government never talks about gold. Other central banks are buying like crazy but we never hear a peep from our central bank. Some think we don't have any gold and are calling for an audit of Ft. Knox reserves. Others believe, when the time comes for drastic measures, government will once again confiscate private gold holdings to help solve a debt problem. It would be blatant theft for any government to encourage citizens to own gold, only to one day confiscate it.

Will the outcome drive gold prices higher? Is this just the first step toward another gold confiscation act? Stay in touch with the issues at LearCapital.com where you will get regular breaking news and special gold reports.

Lear Capital: Physical Gold and Silver vs. Gold and Silver Stocks

Thursday, April 28, 2011 by David Engstrom

When it comes to precious metals, an often discussed topic is whether one should own precious metal stocks or the actual physical metals. Here's some things to ponder if you are considering placing money into either.

Let's ask the question. Why does one own metals' stocks? Answer? Because they expect metal prices to rise. Any answer you give after this, takes second place, third, fourth, whatever!

Why does one own the physical metal? Answer? Because you expect metal prices to rise. Basically the same answer.

Here's the catch. Rising metal prices do not guarantee rising stock prices. There's a multitude of variables to weigh, not the least of which is that the more of a given metal you take out of a mine, the closer you get to depleting it. I don't care what mine you own, every ounce of gold taken from it brings you that much closer to the last ounce it can produce.

This brings up the next point. If one mine produces more profit than the next, which stock would you buy? Naturally, the one that produces at the least possible cost for the highest possible profit should get the nod. Hence, a rising metal price does not guarantee all corresponding metal stocks will rise in lock-step.

Look at it this way. If a given metal goes down in value, it can put a mine out of business. But, the metal itself, will never be worth zero. There are many variables that can affect a stock value beyond just the price of the metal it mines.

Barrick Gold, said to be the largest gold mining company in the world, may serve as an example that the value of a gold stock is, in many regards, subjective. A Reuters release, reported Barrick stock fell 6.73% the day it announced its intent to purchase Equinox Minerals, an Australian Copper mine.

"Barrick explains the move down," said Francis Campeau, broker at MF Global Canada in Montreal. "I'm wondering if the gold players are going to steer away from Barrick to get to a more gold play."

Another variable affecting the price of precious metals and metals' stocks is inflation. On one hand, inflation and inflation fears help drive metal prices higher. On the other, inflation means higher mining costs and a strain on profitability. Let's call it the Doctor Dolittle "pushmi-pullyu" effect.

Other factors that could adversely affect the price of mining stocks, may include, worker strikes, safety shutdowns, accidents, profit forecasts and PR. Here, factors that slow production, even if for a short time, could help to drive metals' prices higher. Granted, the effect may only be "transitory," but present, nonetheless. As for PR, that's just a beauty contest. May the prettiest ads win.

The bottom line is, rising metals' prices are guaranteed to increase the value of a metals' portfolio. But, when it comes to stocks, there is no rule that says rising metals' prices must raise the value of related stocks.

Lear Capital review of article: More On How Inflation Turns US (read consumer staple goods companies) Into Con Artists

Wednesday, April 27, 2011 by Eric Harding

From the article: “Chips are disappearing from bags, candy from boxes and vegetables from cans.

As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages.

With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less.”

Man-o-man. Con artists is what the author of this article John Rubino calls the perpetrators. However, as easy as it is to change packaging sizes, you could see this coming! Want some good news? Physical gold and silver coins have held value for a very long time, as in 6,000 years. A 1.0 oz. gold coin is the same size and weight today as it was when gold coins were our currency.

If you are interested in something that doesn’t shrivel up or dwindle like the above size bags, boxes or cans, give us a call at Lear Capital !

Lear Capital: Can I Sell my Gold and Silver Now?

Tuesday, April 19, 2011 by David Engstrom

Gold prices seem to be setting new highs daily. Of course those would be highs not adjusted for inflation or debasement of the dollar. If we were to set real highs, we would have to see gold prices rise near $2400 per ounce - maybe higher! Obviously, a dollar today is worth far less than a dollar was in 1980 when gold and silver hit long-standing record highs of $850 an ounce and $54 respectively.

Just to help you put things into perspective, in 1980 a postage stamp was $.15 cents, a gallon of gas was $1.25 and the Median Household Income was $17,710.00. Our entire Federal Debt was just $909.1 billion and government spending was a paltry $590.95 billion. Here's one more little tidbit, the Dow reached a high of 1000 and a low of 759.

These things considered, it's no stretch to say gold would have to triple it's 1980 record high in order to claim the title of, "New Record Holder". Of course, most realize the $850 an ounce price marked the end of a bubble. Gold prices, as did silver, made parabolic moves higher and then quickly dropped off their highs to enter a new age of easy credit, higher wages and economic expansion. Thank you Ronny.

Is that what gold and silver investors have to look forward to again? Reaganesque growth? The stigma attached to precious metals investors is that they hope for doom, economic collapse, hyperinflation, currency failure and every other kind of market debacle. I believe the contrary. I believe precious metals investors would gladly trade gains from higher metal prices for a return to the days when real estate had value, stocks were constantly driving to new highs and jobs were plenty.

Enter budget, deficits and debt. The prospect of a return to utopia seems to grow weaker each day. Hence, more gold and silver are being bought - not less! So when do we sell? Have prices topped? Is it time to liquidate and take profit?

If we believe gold's 5000 year history as a preserver of wealth, we have to begin to compare the gold price to the markets and weigh its value in comparison to our Federal Budget our deficits and our debt. Are precious metals now working to preserve wealth? This is where it gets interesting.

Let's take the Dow for example, to buy an equivalent position in the Dow today as existed in 1980, it would cost you 12 times as many dollars.

Note: The Dow is a very convoluted and subjective measure. The Dow components themselves are subject to change by committee in order to better reflect current economic conditions. In fact, did you know GE is the only remaining of 11 original components? Then, in order to account for things like stock splits, additional calculations are made to keep the measure accurate. See this link for a complete explanation on the History of the Dow.

As we relate today's gold price to the Dow, you see why some say gold could be trading as high as $10,000 an ounce in order to pace growth in the Dow average. If we look at budgets and debt, the case for gold at an even higher price per ounce can be made. Today, Federal spending is 6 times what it was in 1980 and debt - which we could reasonably argue should pace inflation and debasement of the dollar - is nearly 16 times greater. . . and rising!

Now to the question, "Can I sell my gold and silver?"

Obviously it's a question I hear more often as prices move higher. I believe that is a question each person has to answer for themselves. I usually ask some questions in return, "Do you need the money?", "If you sold, what would you put the dollars in?" . . . and, "Why did you decide to own gold and silver to begin with?

Let's keep in mind that, really, very few individual investors own either gold or silver. (See this previous report that puts into perspective the actual size of the metals market in comparison to world financial markets.) The price has risen because central banks are buying it, countries are buying it and huge investors who see the collapse of currencies on the horizon, are all buying gold. Do you think just because gold and silver have climbed this far, (not even to inflation adjusted highs) that those big players are licking their chops to sell?

When I ask the question, "Why did you decide to own precious metals to begin with?" the answer is usually something to the effect, when the world money collapses I want something real as protection. Bingo! That is the same reason central banks and countries like Brazil, Russia, India and China (others too) are all buying gold and silver. As far as I can see, there has been no real currency collapse to this point. We still print it, spend it and use it to pay our bills and buy things. Hyperinflation is at bay. The illusion is alive.

So, if the purpose for owning gold and silver and other precious metals is to protect against collapse, wouldn't selling it now defeat the purpose? And if currencies do not collapse? Then great, the plan to print our way out of depression and collapse worked and we can all go back to work, borrow some money and speculate in real estate again.

Lear Capital: Volatile Markets Send Gold and Silver Lower - But not for Long!

Monday, April 18, 2011 by David Engstrom

On days of high market volatility, eyes remain glued to financial news in search of an explanation! Today, stocks are extremely volatile, the dollar is on a bit of a rebound and commodities are trying to figure out if they have run too high.

Last week I spoke with some traders who said stocks were due for a significant sell-off. Ever since Cisco announced plans to cut 550 jobs, markets became super sensitive. Then, after showing signs of shrinking jobless claims, jobless claims rose back above the 400,000 level to further exacerbate fears that our employment situation may not be improving.

Historically, spring marks a time when seasonal employees get called back to work - construction workers being a big part of that. Now, doubt has replaced confidence in the prospect of higher employment ahead.

Today, Citi announced quarterly earnings of $.10 cents a share against $.09 of expectations. Still, there is significant cause for concern over Citi's future profitability as total revenues were down from $3.8 billion to $3.37 billion. Falling revenue indicates profits are more likely being earned through cost cutting than growth.

These numbers are consistent with a Financial News report that says, "Investment Banks will need to take out between 6% and 8% of their costs in the next 12-18 months if they are to meet their reduced return-on-equity targets, with as many as 20,000 back and middle-office jobs likely to go in the process . . ."

In short, one explanation of today's market volatility could be that investors are catching up with reality. I've heard the term "slower growth" about a gillion times today, as if we all believed in fast growth just a few days ago. Now, throw in constant warnings over debt, from our nation's leader and it's easy to explain investor concerns.

I think America is starting to believe both sides of politician's debt arguments. Either way, we're in trouble. As one reader, Anne, put it, you have to slow a runaway train before stopping it. Spending cuts should not be so highly contested. The amount both parties strive for is minuscule and meaningless. Hence, no confidence in any effort to get us out of this mess.

With the markets under great selling pressure today, the usual reaction in metals is to sell off some - especially after significant gains - to lock in profits. Earlier, we did hear reports of major sell-offs of Precious Metal ETF shares. Gold moved off its new high of $1498 an ounce and silver pulled back from a another new 31 year high of $43.40. Currently, however, both the gold price and silver price are headed back to those levels.

How long can the metals rally hold up? Of course long term, there is a strong consensus that both are headed much higher. Short term? Anything can happen as big players move in and out of stocks, bonds, metals and just about every investment. If today's Exodus from Metals ETFs, was supposed to be the move of larger players that drives down both gold and silver, then I think the bull market is showing signs of great strength.

Time will tell. Meanwhile, more and more people are fixated on the latest market news and precious metals reports. If you are one who never likes to be more than a few seconds away from real time precious metals prices, check out Lear Capital's mobile real-time gold and silver prices. Just type in www.learcapital.com/mobile on your smart phone browser to have real-time metals prices at your fingertips.

Lear Capital: Roller Blades on a Treadmill - Higher Gold Ahead

Tuesday, April 12, 2011 by David Engstrom

It's been awhile since we've heard about job cuts by major U.S. employers. Instead, we hear statistics about falling unemployment, as if those whose unemployment benefits have expired, no longer count.

Making headlines today, however, is Cisco's elimination of 550 jobs. Is this a sign that recovery may be slower than the slow we hear about? Other giant companies are taking similar action. In late February, Medtronic, a Minneapolis based medical device giant, announced it would be cutting 1500 to 2000 jobs by 4Q. Now, the news is out. Announcement of which jobs will be cut has begun.

In March, another medical device maker, Boston Scientific, also announced a plan to cut jobs. Specifics have not yet been released as to how many or which jobs. Cuts nonetheless!

The Medical device industry is not alone, Boeing announced 190 job cuts in its Huntsville, Alabama facility. Then, just last week, bank giant Wells Fargo announced it would cut some 1900 jobs due to a dramatic fall in demand for mortgages or refis. Surprise surprise!

Bank of America is also joining the chorus announcing a "Small" number of job cuts. But, according to an April 4, 2011, Financial News report, in order to reduce costs by 6% to 8% in the next 12 - 18 months, banks could be looking to make massive job cuts. It is estimated the top 20 banks are top-heavy by as many as 20,000 employees, which puts those jobs at risk.

These don't seem like signs of recovery, especially in light of the massive cuts expected from the industry that benefited most from government bailouts. After trillions in collective bailouts, that were supposed to trickle down to the average worker and homeowner, it seems the "average" of us are suffering the most. Is it any wonder the banks need less employees when foreclosures are expected to rise in 2011 beyond the record 1.2 million in 2010?

So, where does that leave further stimulus efforts? So far it seems, the more stimulus needed the more that is created. But, even in light of $10 plus trillion in collective Fed and Government bailout efforts, progress seems to evade the effort. It's like the Fed is running on a debt treadmill wearing roller blades. They never get tired of printing more money even if no progress is made toward recovery.

That's why I believe, we have many more QEs to look forward to along with much higher gold prices. In the last 30 months, in the midst of the most money printing in history, gold has doubled. I see no reason for that momentum to stop. As fast as the debt treadmill is set to run, the Fed will keep pace. Inflation has already taken root. Even the Fed is beginning to fear it, telling us higher interest rates may be ahead.

If you doubt inflation is upon us, just look at gas next time you fill up. Hence, another reason to own gold as inflation and higher gold prices go hand in hand.

Lear Capital: What's Another War Going To Do To the Gold Price?

Monday, March 21, 2011 by David Engstrom

As hundreds of cruise missiles begin to fly toward Libyan targets, at some $1 million per copy, (reports vary) one has to wonder, who's going to pay for all this. I mean, we're broke! We're $14 trillion in debt with no visible means to pay it back. Now, another war has begun.

This morning, talk show host Laura Ingraham, commented on Fox News that she believes the U.S. will end up paying for the majority of costs. I recall being told at the outset of both Gulf wars that, ultimately, Irag would pay us back in oil profits. That was the last I heard of that.

The lack of comment from the White House on the subject of cost, suggests to me that Laura Ingraham may be right. Others would argue that since the actions are as a result of passing U.N. resolution 1973, that many nations will bear the cost. Will we ever know exactly?

Regardless of who bears what cost, one thing is certain. It will cost us something and since we don't have the money, that means we will have to print even more to cover the cost.

As for gold? This all adds up to upward pressure on the gold price. Goldman Sachs recently weighed in with another projection, putting a target price of $1690 on an ounce of gold, within the next 12 months. That's up nearly 20% from today's levels.

Every day it appears Gold is becoming a safer bet to protect and grow your retirement accounts. To learn more, make regular visits to LearCapital.com for breaking news on the Markets, the Economy and Gold.

Lear Capital: What's In Store For Gold When Stimulus Runs Out?

Tuesday, February 15, 2011 by David Engstrom

Here's a little quiz for you. When was the last time we had a Federal Budget Deficit under $500 billion? In 2008 the budget deficit came in at a mere $438 billion. Since then we have been running deficits in excess of $1 trillion each year. In 2009 - $1.4 trillion, 2010 - $1.3 trillion, $1.5 trillion is written in for 2011 and now 2012 projects $1.1 trillion.

At the outset of 2009, increased deficit spending was said to be needed in order to stimulate the economy. That said, it is safe to conclude hundreds of billions more stimulus has been built into each subsequent year at least through 2012.

Yet, today, recovery is still uncertain. Were it not so, the Fed would not have pledged, last November, to buy $600 billion in Treasuries through June of 2011. That amounts to about $85 billion per month spent by the Fed to buy our own debt. Were there no other buyers? And, who will the buyers be once the program ends?

With $1 trillion plus annual deficits built into the budget through at least 2012, it looks to me like someone has to step in to continue what the Fed started. Even if we believe the deficit will be cut in half before this Presidential term is over, we're still talking hundreds of billions in deficits.

I just saw the statistic this morning that 16.2% of workers are still unemployed or underemployed. And let's not forget those who are now discouraged and have somehow escaped count once their unemployment benefits ran out. Throw in the self-employed who are out of work but not elligible to collect unemployment and the number of people still not earning full wages or any wages, is staggering.

In 2010, a record number of foreclosure filings were recorded. Weighing in at 2.9 million homes, that number is expected to rise in 2011.

Can we really look at data like this and say recovery is underway? Are we really just a few months away from completing our last round of quantitative easing/stimulus? Time always tells and time never lies.

The data suggests we are still a long way from recovery and more stimulus will be needed well beyond June when QE2 is supposed to come to an end. Should that be the case, inflation concerns heighten. Even today, Eric Bolen of Fox News and Fox Business Network, warns of inflation in clothing prices to set in this spring. Food prices are also inflating as are energy costs.

Historically, inflation and gold have walked hand in hand, as gold is used to hedge against it. This may explain why the predicted dip in gold prices, down to as low as $1225 per ounce, has yet to come to pass. Instead, gold bounced off the $1310 level and has quietly moved back near the $1400 an ounce level.

If stimulus does end, perhaps even more dire consequences await. If the Fed is currently printing enough money to, in effect, pay the bills, what happens when they stop? Who pays the bills then? Got gold?

Lear Capital: Does the Fed Secretly Want Higher Gold Prices?

Wednesday, February 2, 2011 by David Engstrom

Some believe the Fed would like nothing else but to inflate away our debt. Why? If today's debt, in dollars, can be paid back with future dollars worth less, inflation has then, effectively, discounted the debt.

For individuals, a good example is your mortgage. In a true inflationary environment, the cost of goods, services and wages all rise together. So, while your home value may rise, your mortgage balance did not inflate proportionately with the inflated value of your home. Hence, you are allowed to pay off your mortgage debt with dollars that have lost purchasing power in the case of almost everything except your mortgage balance.

Such is the same for the Fed/Government. If they breed inflation, it then becomes that much more manageable to pay off today's debt with future dollars that are worth less.

I hearken you back to August 15, 1971 when Richard Nixon announced he was taking the U.S. off the Gold Standard. At that time Nixon realized foreign countries were hoarding more gold and silver backed currency than could actually be redeemed by the precious metal's reserves we held. By taking us off the Gold Standard the U.S. was then free to print dollars backed by the full faith of the Government - NOT GOLD!

From that time to January 1980, inflation ran near 20% and so did interest rates. Gold prices climbed 1700% by some measure. To obtain a complete report titled, "Will Rising Rates send Gold up 1700%?" Click here to request the information offered.

By taking us off the Gold Standard, Nixon put the U.S. in a position of being able to pay off dollar denominated debt with dollars that became worth less once the gold backing was removed.

In a Reuters report dated Feb. 1, we find evidence the Fed is already pondering QE3. See Kansas City Fed President Thomas Hoenig's comments in this article. We're only about half way through QE2 and already QE3 is appearing on the radar.

In a November 5, 2010 report, I cited Goldman Sachs claims that it could take $4 trillion more of Quantitative Easing to get us out of this mess. Hoenig, regardless of his personal belief in QE, has now indicated it may be true that the stage is set for many years of additional QE.

Is it too much of a stretch to believe the Fed wants higher gold prices? As holder of the largest gold reserves in the world, (8966 tons worth some $387 billion) the benefit to the U.S., of gold prices double or triple where they are today, becomes apparent. Now we are looking at two benefits to inflation. One being, it allows you to pay off today's debt with future dollars worth less. The other is higher gold prices.

Some believe higher gold prices could put the U.S. in position to back the dollar, at least in part, by gold. This is rumored to be what some Arab nations intend to do with the Dinar. China is also rumored to be considering backing their currency with gold. If this truly is the case, the U.S. would have to be in a similar position to do the same with the dollar.

Of course this is all theory but it does go a long way toward explaining why central bank gold demand is soaring. It also gives good reason for all of us to own a few gold coins. Lear Capital

Lear Capital: Gold and the Bailout that Could Have Worked

Tuesday, January 18, 2011 by David Engstrom

It seems like a lifetime ago, (in debt years it adds up to about 10) when we got our first stimulus checks. Remember? Based on your 2007 return, some 130 million people either got $300 or $600 as individuals or $600 to $1200 for married couples. That provided about as much fuel for the economy as a cup of water would to an old steam engine.

That was estimated to cost $152 billion. No sooner was that plan implemented than the flood gates of stimulus opened up. To follow were plans for $200 billion of infrastructure stimulus, Cash for Clunkers, First Time Home Buyers Credits, Energy Efficient Windows, Appliances, then Tarp, and on and on.

All things thrown into the pot, some estimate the total of stimulus and bailouts, so far, to well exceed $10 trillion when you add in purchases by the Fed of toxic or worthless assets like Fannie, Freddie, other mortgage backed securities and then QE2. However, for purposes of this illustration, let's just look at the first $5 trillion of stimulus.

Let's first put this into perspective. $5 trillion comes out to about $17,000 per man, woman or child in the U.S. Did you get $17,000 worth of stimulus? We know the answer is "No" but had to ask to make the point. All of the stimulus (debt) created did not trickle down to consumers. A trickle of stimulus may have trickled down but that's it.

What I could never figure out is, if stimulus is being borrowed from me, and, I or my kids are responsible for paying back the debt, why didn't I and my kids each get $17,000. Can you imagine the spending frenzy. And what if, in doing so, government said we encourage some spending but, we also encourage some savings because some day we have to pay this back. Bear with me now with another "what if". And, what if government said, we also encourage at least some of the portion you intend to save be spent on Gold as historically, gold is a safe haven in times of inflation and economic uncertainty?

If this all started back in May of 2008, with the first $152 billion of stimulus, some of us would have owned gold at prices just above $700 an ounce. As much as half of your stimulus could have been spent on cars, houses, windows, refrigerators and whatever else earned you tax credits. Remember, one persons tax credits, when spent, turn into another person's job and income. Then spend the other half on gold.

With gold now at $1400/oz., give or take, the other half would have grown in dollar terms to what you started with. Theoretically, you could have paid back all the stimulus and have been better off for it.

Some may say, why would government give us money to buy gold? All it would do is drive gold demand and run up the price. To this I ask, why does the Fed intend to buy up $600 billion in Treasuries in order to encourage people to take that $600 billion to buy equities? Won't that drive up the price of Equities?

So what, if it drives gold demand and the gold price higher? The market would keep its own balance as people bought and sold according to the benefit of each. Buy low, sell high, pay off debt and have more money to buy more of everything.

Sound too simple? Why do you think the Chinese, first legalized gold ownership for their citizens about 5 years ago? Once this step was taken, why then did they begin to encourage all citizens to spend some of each paycheck on gold? Sure, this has served to drive the price of gold higher and you know what? If just Chinese demand grows to the proportion it's expected to grow, gold prices could rise to astronomical highs - in dollars terms that is!

Sure, this plan sounds simple, so simple that it could not have worked. Let me assure you. Millions of people are already following it. Maybe billions, on a global scale. It is this growing demand and the continued debasement of currency through stimulus, that will continue to drive demand even higher.

Don't get caught short. Don't be left holding the bag of debt while billions of others hold all the gold and make all the rules.

Visit LearCapital.com today for Breaking News, Real-Time Gold Prices, Free Special Economic Reports and much more.

Lear Capital: Inflation and Gold

Monday, January 17, 2011 by David Engstrom

I think it is safe to say neither QE1 nor QE2 is trickling down to the average income earner. And if it is, it's being spent to keep up with inflation that we are told really doesn't exist.

Evidence of this comes to us as we examine consumer spending data. This chart, prepared by Gallop, compares spending this year to last. When you consider trillions of stimulus, it's truly a wonder as to where all the money has gone.

From February 2009 through January 2010, the average consumer spent an average of $64.42 per day. From February 2010 through January 2011 (January 2011 data based on estimates) that number had risen to $64.67.

This rise of $.25 per day came in the wake of a $1.8 trillion deficit that equals about $12,000 per worker. Now you tell me how this extra spending is going to produce enough spending to increase wages to the point where the added tax revenue can come close to repaying just one-year's deficit let alone $14 trillion of accumulated debt.

If my math is correct, consumer spending, per this chart, rose less than $28 billion in 2010. Where did the other $1.772 trillion go? According to Dave Rosenberg of Gluskin Sheff, the American consumer is in for even a greater challenge in 2011.

According to Dave, the rise in gas prices, not considering further rises from today's $3 plus per gallon, will take about $60 billion of spending power from consumers this year. Rising food costs could take another $40 billion.

There goes about half the benefit of the estimated 2011 reduction in employee-side payroll taxes. If estimates of higher gas prices near $4 to $5 per gallon by summer come to fruition, there goes the other half of that beneift.

To me, indications are that stimulus is highly inflationary when it comes to goods or services that consumers must buy - like food and energy. However, that leaves fewer and fewer dollars available for non-discretionary spending. Tell me how an economy can grow when more and more of your money goes to keeping warm and eating.

So far, the effect of stimulus on the economy has been equal to the results you get when you try to pound a railroad spike with a tack hammer. Yes, there may be some progress, but it is painfully slow, to say the least.

Meanwhile, back at the gold mine, gold prices continue rising in response to inflation. While the cost of things we don't need to buy may be falling, the cost of things we must have to survive are rising. Savvy investors, who still can, are learning to put some of their savings into precious metals. The rise in gold prices over the last 10 years, (more so in the last two years) has more than kept pace with rising food and energy costs.

I think it's this simple. As you hear our officials speak of inflation as something currently non-existent, make the distinction between discretionary spending and non-discretionary. Things you don't need may be going down in price while things you must have are going up. This serves to fuel the illusion, (at least for those who still have jobs) that life has not changed. Because you are able to maintain your lifestyle, there is little fear of further economic crisis. To listen to the experts, you have survived the worst and things will slowly get better.

But, let's travel down this road for a period of time. If the trend continues and food and energy costs continue to rise, the amount of discretionary income we may have now will erode. Then, eventually, purchases made with discretionary income will also decline. People won't be so quick to trade up for the new cell phone or the 360 hz television. 240 hz will be fine and as long as I can still hear, text, email and catch sports scores from my phone, I just don't need the upgrade right now.

Cars will be run longer and gourmet coffee will be cut down to a weekly treat instead of daily. Dinner out will become a monthly event instead of every Friday night and let's not forget our nails. Maybe it's time we learn to do our own.

Just with these few mentions, think of all the jobs dependent on the consumer having disposable income. Think of an entire country whose economy relies so heavily on our consumer's ability to buy "Stuff"! What happens when their economy shrinks and they no longer buy our debt? And when we do spend money, what is the real effect of having millions, billions or trillions of dollars leave our country on its way to those who produce the world's oil?

What's the solution? We may be so far gone there are no solutions to the greater problem just ways to survive and prosper yourself as inflation is all but a foregone conclusion. You have to own assets that pace inflation. If you don't yet own gold, maybe now's the time.

Lear Capital: Food Inflation to Drive Gold Higher

Thursday, January 13, 2011 by David Engstrom

As I am known to make point of, inflation may be running at numbers much higher than the reported data indicates. Said data mostly ignores the cost of food and energy as though none of us needs to eat, heat our homes or drive our cars.

The questions are, how long can rising inflation go unnoticed? What are the consequences of widespread realization?

In an FT.com article yesterday, we see evidence the inflation secret is leaking out. The article is titled, World Moves Closer to Food Price Shock. The title says it all - and the consequences?

The effects of higher food prices trickle down through the economy, affecting virtually every aspect. Even the Fed acknowledges, we all need to spend more money to bring about a true recovery. If we have to spend more on Food, that means there is less disposable income to spend on other things. Unless wages rise along with prices, we cannot fulfill the Fed's ambition.

You see where all this is heading. More stimulus, more printed money, higher debt, weaker dollar. . . all conditions favorable to the gold price. Inflation and gold have walked hand in hand through all of time. With gold demand rising, it's becoming evident that individuals, governments and central banks are responding to the forecast of higher inflation.

Running neck and neck with food inflation is the cost of energy. Oil, currently above $91 a barrel, is predicted by some to reach $100 per barrel soon and perhaps higher. Eric Bolen of Fox News and Fox Business Networks, says we could soon see gasoline at $7 per gallon.

Can you even imagine a more volatile formula for skyrocketing inflation? As fuel costs rise, that drives the cost of virtually every product we buy, higher. Shipping costs rise, trucking costs rise, the very trip to the grocery store rises as nothing moves in this country without consuming fuel.

Now ask yourself this question. If fuel costs double and food follows, what is the true value of your savings and retirement accounts? Not everyone needs to drive a Cadillac in retirement but everyone does need transportation and food. Every day it becomes more critical to offset lost purchasing power of your dollar and your savings and retirement accounts with an asset that has a history of preserving purchasing power - Gold!

With inflation awareness only now coming to light, one can easily make the case that the real gold bull market is yet to begin. Sure, gold's move 400% in the last decade, is definitely deemed bullish. But, if this occurred when inflation was mostly non-existent, what heights could the gold price attain once inflation really takes hold?

To learn more and to keep pace with the trends, make regular visits to LearCapital.com.

Lear Capital: Inflation Measures Indicate Gold Is Still Cheap as Dirt

Thursday, January 6, 2011 by David Engstrom

As the Fed continues down the path of stimulus, discussion over hyperinflation intensifies. Today one of my favorite analysts, Eric Bolen of Fox News and Fox Business networks, did a piece on inflation. He says food staples such as rice and bread are headed much higher. He also warned of $7 per gallon gas. Depending on the rate at which these prices rise, that could constitute hyperinflation.

Invariably, as the topic of hyperinflation is broached, the subject of gold enters the picture. It's widely accepted that inflation affects the gold price. A recent article by Egon von Greyerz, of Matterhorn Capital Management, tells us hyperinflation could drive gold to unthinkable heights.

One common reference to inflation and gold is that when adjusted for inflation today, gold would have to reach levels higher than $2400 an ounce to equal its 1980 high of $850 an ounce. That's 65% higher than where the gold price is now. This suggests gold may be undervalued.

Let's look at another inflation measure like the price of gas. 30 years ago a gallon of gas was about a dollar. Today it's three times that and by some reports could be four or five times that by summer. This suggests a target gold price over $4,000 an ounce.

And, if anything tells the inflation story it's government spending. In 1980 it cost $600 billion to run our country. Now it costs $3.6 trillion, six times more than it did 30 years ago. This brings $5000 an ounce gold into view.

Then consider the effect inflation has had on our national debt. A case could be made today, for gold well above $10,000 an ounce. To some this borders on the unthinkable, but numbers don't lie. In 1980 our national debt was $900 billion, give or take a hundred million here or there. Today, it's $14 trillion, if you don't count another $40 trillion or so of unfunded liabilities, pension obligations, Fannie and Freddie debt and whatever else we choose to pretend no longer exists.

If the rise in gold price today, mirrored the inflation induced rise in our real national debt, now we arrive at an unthinkable number. But here's the point. These are cases we can make for gold, now, based on normal inflation and its comparative effect on other commodities, budgets and debt.

If we get hyperinflation, brought on by ongoing and massive stimulus, the gold price could truly rise to unthinkable heights. By any measure, the case for gold being undervalued at today's prices is very strong. It doesn't take much of an imagination to see why gold is still cheap as dirt.