Inflation And Gold

Jeff Clark of Big Gold: “the downfall of every fiat currency are the two D’s. Debts and Deficits"

Wednesday, February 22, 2012 by Eric Harding

Now that we added another percent over the 100% of debt-to-GDP ratio in just 21 days (can anyone say exponential debt accumulation? Sure you can!), it is time to give kudos to Chuck Butler of Everbank for catching a good find today in his Daily Pfennig. Here’s Chuck:

“I read a great piece on Gold yesterday, by Jeff Clark of Big Gold who writes for Casey Research. Jeff did a great job in the article, and so I stole a snippet of it… Here, Jeff talks about “the downfall of every fiat currency (the dollar) are the two D’s. Debts and Deficits… So with that in mind, consider the following:

• Morgan Stanley reported that there is "no historical precedent" for an economy that exceeds a 250% debt-to-GDP ratio without experiencing some sort of financial crisis or high inflation. US total debt currently exceeds GDP by roughly 400%.

• Detailed studies of government debt levels over the past 100 years show that debts have never been repaid (in original currency units) when they exceed 80% of GDP. US government debt will exceed 100% of GDP this year.

• Investment legend Marc Faber reports that once a country's payments on debt exceed 30% of tax revenue, the currency is "done for." By some estimates, the US will hit that ratio this year.

• Peter Bernholz, a leading expert on hyperinflation, states unequivocally that "hyperinflation is caused by government budget deficits." Next year's US budget deficit is projected to be $1.3 trillion.

Chuck again… yes, debts and deficits… I’ve ranted over these for years, and people (non Pfennig readers!) are finally beginning to realize that deficits really do matter! And as long as we, as a country continue to go down this road of debts and deficits, I would look for Gold to remain the anti-dollar…"

Folks, you can almost feel the tears welling up, as THIS will end in tears. Debt accumulation at this pace destroys currencies. I agree with Jeff Clark. I agree with Chuck Butler! Want real gold, real physical gold that stands the test of time? Given what appears to be on the horizon, it is time to accumulate some gold coins. Time to call Lear Capital!

Gold Gains Rebuff Buffett Claims

Thursday, February 16, 2012 by David Engstrom

Whatever prompted the comments, Warren Buffett recently claimed stocks were safer than gold and bonds, "by far." Further stating, equities "will prove to be the runaway winner."

When I hear comments like this, I immediately question the basis for making such a bold claim. Surely, the basis for this claim must be that Berkshire Hathaway stock has done well since the collapse of Lehman and the onset of the 2008 credit crisis. If there was ever a time when safety was foremost on the minds of investors, it would be in the days, months and years post crisis.

Today, at the time of this writing, one share of BRK-A trades at $117,862.99. On the day the 2008 credit crisis began, September 15, 2008, one share traded for $147,000. So let's talk about safe. BRK-A, today, is down 19% from its pre-crisis high. It seems BRK-A was not a destination of choice on the itinerary of the flight to safety.

Instead, investors headed for bonds, (despite negative real rates of return) Gold, Silver and other commodities. In fact, Gold prices, since the Lehman collapse have doubled. Silver is up about 80%. Maybe Mr. Buffett meant stocks in general, not just BRK-A. Today the S&P is up 8%, since September 2008, the Dow is up 13% and the Nasdaq, thanks to a couple big hitters like AAPL and GOOG, is up 30%,

So far I'm still not seeing a case for stocks being safer than gold or bonds. Maybe Mr. Buffett was not just referring to periods of time when safety was a primary investor concern. Maybe he meant in good times and bad like we've seen over the last decade. Indeed BRK-A is up over 60% in the last 10 years while the major indexes are struggling just to be even. Then what about Gold?

In the last decade gold is up 500% far outperforming stocks, bonds, real estate...has anything beat 500% over the last decade? Will the trend continue?

As we move further and further into debt - debt we cannot pay - it's hard to imagine an end to printed money or government borrowing. Surely an end to either could produce an Apocalyptic end to our financial system. Inflation appears to be the only other alternative. Print money, debase the dollar's value and in such a case drive the dollar price of gold to even higher highs.

Where do you want to bet your savings and retirement for the next 10 years?

Lear Capital Calls For Gold up 30% in 2012

Thursday, January 19, 2012 by David Engstrom

Is the Gold Rally over? Or, has it just begun?

September 15, 2008 - The U.S. credit crisis erupted with the failure of Lehman Brothers. Overnight, $600 billion vanished in the largest bankruptcy in American History. Panic set in to the already beleaguered markets. In just 3 weeks the Dow lost 2,937 points, the S&P lost 356 and the NASDAQ 624. It is said, we were just minutes away from economic Armageddon.

By October 3, with seemingly no choice, the Troubled Asset Relief Program (TARP) was signed into law. It provided $700 billion be used to purchase toxic assets from banks deemed too big to fail. However, that alone wasn't enough to halt a market freefall. Not until late November, when the Fed announced its infamous $600 billion round of Quantitative Easing (QE1), did market stability return.

By March 2, 2009, as the last of the $600 billion was spent, it became apparent QE1 wasn't enough as the markets teetered on the brink of total meltdown. The DOW had fallen from record highs above 14,000 to just 6,626, the S&P 500 fell from a record high above 1,500 to 683 - the NASDAQ fell from 2,810 to 1,293.

Then, in the markets' darkest hour, the Fed once again came to the rescue with an extension of QE1. On March 18, 2009, it announced another trillion dollars would be committed to easing. Immediately, markets reacted positively and proceeded to rebound.

The rebound was strong seeing a steady rise over the next 12 months. Then, in anticipation of March 31, 2010 (the end of QE1), the markets began to crash. The four months to follow saw the S&P fall 16% creating fear of another wholesale collapse back to March 2009 lows.

By August 23, 2010, yielding to market pressures, the Fed, during Jackson Hole, hinted at another round of easing. The markets immediately sent a signal of approval and edged higher. On November 3, 2010 the Fed confirmed another $600 - $900 billion for the purchase of treasuries. QE2 would now run to June 30, 2011.

In the time between Jackson Hole and the expiration of QE2, markets soared. The S&P climbed 28%. Then QE2 ended and the markets threatened another crash. Printed money had become to the markets what a drug is to an addict. Take away the drug and a crash is inevitable. Again the Fed was cornered.

In response, the Fed made an August 9, 2011 announcement of plans to hold interest rates at already historic lows. Shortly after, on September 21, it announced the Twist - a fancy term for "refi". The quick successive moves were intended to produce similar rescuing effects on the markets as quantitative easing without having to print more money. Instead, confidence failed to be restored as today's markets flounder in volatility. Hence, rumors of QE3 have surfaced.

It's clear, past stimulus efforts have had only a temporary effect. Numbers don't lie. Since Lehman, the markets have produced Zero Gains. This is especially troubling when you consider an additional $5.2 trillion of national debt incurred for government's own stimulus and bailout programs. That's $8 trillion dollars or more spent with zero results.

One investment, however, has been a consistent winner. GOLD!

Since Lehman, gold prices have doubled as rising demand suggests that, with or without stimulus Gold is in a win-win situation. Without stimulus it's believed markets will crash leaving gold as the safe haven investment that's never been worth zero. And, with stimulus and higher deficits, paper currencies lose value, inflation sets in and gold prices rise as the purchasing power of paper money falls.

Will QE3 become a reality? Will deficits continue to climb? According to a special report released by Lear Capital that deals with the question, Is Gold still the answer for investors?, "The Fed may have no choice but to print more money." And, when we asked Kevin DeMeritt, President of Lear Capital what that would mean for the gold price, DeMeritt responded, "More stimulus would set the stage for gold to repeat its performance of the last 3 years. That would mean another 30% rise in 2012."

He quickly added however, "But more stimulus and rising debt are just 2 of the 7 reasons we've identified that could send gold prices 30% higher this year. If a combination of 3 or more play out at the same time, gold could go much higher than that."

Lear Capital is not alone in its call for higher gold prices ahead. In December, Citi Bank released its report The 12 Charts of Christmas wherein Citi projects gold at $2400 an ounce in 2012 and $3400 in 2013. That's a 50% rise in 2012 and more than 100% by 2013. Morgan Stanley joins the chorus with a $2200 projection and a 35% rise this year. Merrill Lynch and Goldman Sachs, while less aggressive, are also bullish on gold projecting 33% and 23% gains respectively.

As revealed in Lear's report, many factors are driving these bullish outlooks on gold. The report delves deeply into the global debt crisis and its effect on gold prices, geopolitical tensions surrounding Iran and the now insatiable demand for gold by the Central Banks of the world. Last year, for the first time in 20 years, Central Banks turned from being net sellers of gold to net buyers. As Lear points out, it is especially intriguing when those who have the power to print more paper money are demanding gold.

Perhaps it's time for a little self-examination. How many 30% winners are in your portfolio right now? No one has a crystal ball, but the case for rising gold is making a lot of people wonder if the gold rally is over or just beginning.

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: The Gold Rally is Over! Not!

Friday, December 16, 2011 by David Engstrom

Today, one faithful reader named Clay said it would be nice if he could get a comment from us on the recent wild price action in precious metals. It is crazy isn't it?

Let me first reiterate prior expressed beliefs, those being, nothing has changed. Since 2008 not one - I mean not one single issue related to the financial crisis that erupted has been resolved. In fact it's gotten worse.

Despite reports that unemployment has declined, the true data show that when you consider the discouraged worker, expired unemployment benefits, shorter work weeks, pay cuts and the conversion of full time jobs to part time, the employment situation in this country is worse than ever.

And, not to Grinch the Christmas spirit, but once the holidays are over, thousands of seasonal jobs will vanish and the jobs picture will change dramatically. Let me give you some examples. UPS reported hiring 55,000 additional workers for the holidays. Fed Ex - another 20,000. Retailers hired hundreds more thousands of seasonal workers as did certain manufacturers and distributors. Unfortunately for these workers, when the holidays end so do the paychecks.

Granted some of these jobs are held by students and full time workers taking on temporary part time work. But to think all this hiring had no short term effect on the jobs picture is just head-in-the-sand logic.

Then there's housing. In November a Bloomberg article called the Housing double dip one of the "scariest business stories of 2011." So, no improvement there either.

Then there's debt. Since 2008 our debt crisis has reached gargantuan levels. Even worse, it is planned to grow by trillions more over the next 10 years. All this Super-Committee talk is just that - Talk! They speak of $400 billion a year cuts in spending but only after they agreed to increase deficit spending each year by more than $1 trillion. So, in reality, the cuts they discuss are really cuts to exorbitant increases already penciled into the budget picture over the next decade.

They say the real crisis in 2008 was averted. That being a total collapse of the American financial system, one that could have driven us to third-world status in a matter of months, weeks or even days. Subsequent actions by the Fed and government to print money saved us. But, from what? Enter gold . . .

As the crisis unfolded, gold prices really began to soar, more than doubling. Governments started buying it, central banks turned from net sellers of gold to net buyers for the first time in 20 years and Gold ETFs sprung up to accommodate the paper gold investor. In other words, much of the world failed to buy into the "crisis averted" story.

To the extent gold prices have dipped now to levels below $1600 an ounce, they are still more than double where they were when stocks were at pre-crisis highs. So begins the cry that the gold bull market is finally over. Meanwhile, what have stocks done? The Dow is down 15% from its pre-crisis high, the S&P is down 19% and the NASDAQ fairing slightly better, is down just 5%. With a recovery like this, who needs a crash?

The markets have been crumbling right before our eyes but never did we hear from the TV geniuses that the stock rally is over and it's time to get out. What we have heard is the perpetual recovery in motion chant. The louder the chant the steeper the drop in stocks.   Almost as often as we have heard the recovery chant, we have heard the claim the gold rally is over. Yet, each time the gold price pulled back, during this undeniable gold bull Market, the pull backs proved to be nothing more than normal periods of consolidation and profit taking. Imagine that! The gold bull market has now spanned more than a decade and more than once someone was compelled to take a profit. The nerve!

Now look! As we exit our trance, it's clear we should have believed the opposite of what we heard. We shouldn't have bought more stocks and we shouldn't have sold our gold. Now the chants have reached a crescendo. Enter Europe . . .

Given our own debt crisis has only been a futile exercise in kicking the can down the road, the end of the road is getting closer and closer. What that means seems to remain a mystery to most, except those like central banks who are buying gold. It means, some day our debts will be so large that we simply cannot pay them. It means default or print more money. If we default, the dollar becomes worthless as do your dollar denominated investments. It would happen fast. (My opinion)

If we print more money to pay debts, as we have been doing, inflation begins to steal dollar value. While it may be a slower death, the end is inevitable and the same as default. Eventually, the dollar becomes worthless as do your dollar denominated assets.

If you remain in denial and believe debt is something we will forever be able to deal with tomorrow, then what I have to say about Europe won't matter. If you believe or perhaps are starting to believe the end of the debt road is approaching, the truth about the European debt crisis will scare you out of your mind. Caution you may be compelled to do as central banks are doing and buy more gold. Don't say I didn't warn you.

Here's some fun facts about the European Debt Crisis and your money.

1. U.S. exposure to bad European debt is as high as $4 trillion, more than 6 times what vanished in the Lehman Bankruptcy. A bankruptcy that almost crumbled the entire global financial system.

2.   A Greek default alone, could wipe out $1.6 trillion of U.S. wealth.

3.   Fitch Ratings, a premier credit ratings agency, reports that," About half of the assets in the 10 largest U.S. prime money-market funds are invested in European bank debt." That means the cash in your money market checking account could be at risk of vanishing in a European Debt Default.

4.   Certificates of Deposit and savings accounts are FDIC insured. Money Market Funds are not.

5.   If the Euro crashes, billions of dollars in U.S. pension funds could be wiped out. Does your pension Fund own European Debt.

6. Three of our largest U.S. banks have an estimated total of more than $60 billion of exposure to European debt. Citigroup, JP Morgan and Bank Of America.

This is all just the beginning of the story on the European Debt Crisis and your money.

Ironically, it could be the default of Europe that crashes our own dollar. I'm only speculating, but if Europe falls and takes the Euro with it, the Fed could be compelled to launch the mother of all QE programs. Maybe this is why one analyst predicts the end of the dollar by 2013.

Now, all this said, do you believe for a second the gold rally is over? --------- I didn't think so. If you feel so compelled as to request more information on Gold and the global debt crisis, visit LearCapital.com today and request our latest special reports and world gold guide.

And if you have yet to receive your FREE End of the Dollar Video from Lear Capital, click here to get your free video today.

Lear Capital: Solving Debt Crisis By Printing More Money, Buying More Gold

Monday, November 28, 2011 by David Engstrom

Today, the markets are expressing exuberance as Europe speaks of printing more money in order to bail itself out of a debt crisis. Here we go again. As soon as it appears Europe is on the brink of collapse, some encouraging news makes its way through the airwaves and for a few days hence, all seems well in Mudville.

Really?

Let's be honest, whatever is known today by European officials, regarding the financial state of Europe, was known a month ago, a year ago and maybe even a decade ago. In my opinion the U.S. has knowingly been kicking the can down the road for over twenty years. Loose money policies have been in place since the advent of the Home Equity Loan (HEL) whereby consumers were duped into sacrificing home equity in favor of temporarily elevating their lifestyle. I will submit, without the "equity-for-debt-trade," the economy would have died a long time ago.

Here in the U.S. warning bells of a credit crisis have been sounding for decades. Trust me! Europe heard them too. Don't try to tell me policy makers, here in the U.S. did not see the dangers that came with the creation of liquidity out of thin air. And, whatever Europe's plan may be for digging the world out of this crisis now, that plan was made long ago.

I've always believed that the "fix" to the crisis, here or in Europe, will be to continue to find ways of creating more liquidity. Printing more money, if you will. In the old days it was accomplished through the seduction of the consumer. We traded our equity for debt and there was no need for government intervention, per se. Now trillions of our dollars in equity are gone. What we had, going into 2008, was wiped out overnight as some $7.7 trillion was lost to instantaneous deleveraging of derivative assets by major banks.

That leaves Central banks and governments as our only source for new liquidity/printed money. Can we expect it? If printed money, either by the consumer, central banks or governments, has been what's bailed us out for more than two decades now, what makes you think this practice will now cease?

The world is faced with two choices. Either print more money and continue to destroy the value of all paper currencies, or, default on debt. Since default would lead to flat out depression and a digression in standard of living back to depression-like standards, I suspect, the world will continue to print more money. Since the U.S. has already printed trillions, it is Europe's turn at bailing out the global markets.

And why not? If we take turns with Europe in printing more money, the vanishing purchasing power of our money will be masked by an equal drop in purchasing power of the Euro and the Pound Sterling. China may become the biggest victim of our printed money as the more we print the less profitable their massive exports become. That will force higher prices and now we begin to see how inflation takes seed and grows.

This also goes far to explain why central banks have become net buyers of gold. If printing money is going to destroy the value of currency, then a counter move to buy gold with some of the money printed, makes perfect sense. The more currency you print the less valuable it becomes. Conversely, the gold price moves higher as valued in currency thus preserving purchasing power. How much gold would you buy if you needed only to print the cash with which to pay for it? It's brilliant! Print more currency to buy more real money - GOLD!

And if Europe fails to print more money? According to Peter Mirici, in a recent New York Post article, "the Euro's death will send gold soaring." Essentially, the death of the Euro would destroy all faith in paper money and drive investors to gold.

So, you see, it appears gold is in a win win situation. If Europe prints more money, then inflation strikes hard and the migration of investor money to gold will continue for many years to come. If the Euro crashes the flight to gold will leave within the hour. Either way it is difficult to see why gold prices would collapse or why gold would all of a sudden become irrelevant as a safe haven investment.

How will you protect your hard-earned savings. To learn more watch this free video and see why gold prices could double even triple where they are today.

Lear Capital review of article: Printing Money to Combat a Global Depression

Tuesday, November 15, 2011 by Eric Harding

Blog Photo I really don’t know how to say it any better than a true analyst like Bill Bonner of The Daily Reckoning. He said it in fine fashion here, discussing the Euro debt crisis:

“What’s the matter with the Germans, anyway? Why don’t they get on-board with the Fed? Why don’t they want to print money? If they would just give the signal — ‘don’t worry, we’ll print the money’ — the whole crisis would be over. In Europe, as in America, bond investors would be reassured. They would know that they’d get their money. The ECB would buy Italy’s bonds, and Greece’s bonds, and Spain’s bonds… Heck, it would buy everyone’s bonds. Bond investors would get their money. They would stop hiking interest rates. Italy could cover its losses.

Everyone would be better off, no? Just like they are in the USA. Right?

It all seems so simple. Why don’t the Germans get it?”

Eric’s add here. I’ll tell you why they don’t get it. Bonner says it perfectly:

“While US policy makers, official economists and jackdaw kibitzers are terrified of another Great Depression, Germany’s officialdom is afraid of hyperinflation. Hardly any Germans are still alive who remember it, but the experience of hyperinflation of the early ’20s is painted on the German character like graffiti on a national monument. They can’t ignore it. They can’t forget it. It will take generations for it to wear off.”

Well, it hasn’t worn off with me. As a student of history and a follower of the advantages to own physical gold, I get it! Don’t helicopter money me! That solves nix! Speaking of a solution, you can solve this in your own portfolio. Add physical gold! Own numismatic silver while you are at it. Call us at 1-800-965-0580 to discuss the gold inflation hedge today!

Lear Capital: Gold Marches in the Printing Money Parade

Thursday, November 10, 2011 by David Engstrom

Our own Fed started it, the Bank of England followed and now the European Central Bank is likely on the verge of joining in. PRINTING MONEY!

Am I the only one sick of hearing about Europe and its on-again-off-again fixes to debt crises? If there was a reasonable fix, don't you think they would just get on with it?

I think the message is clear. Europe is about to embark on its own shock and awe QE initiative. According to a recent Reuters report, the ECB, albeit reluctantly, has been buying bonds issued by its troubled states in order to stave off threats of default. However, of the 300 billion Euros available for deployment toward this effort, only 115 billion remain.

According to Elwin de Groot, senior market economist at Rabobank, "If you look at the past two months, they have bought about 5.5 billion euros each week, so continuing that trend actually would mean that they run out of fuel somewhere around the first quarter of next year."

Italy has been the most recent beneficiary of the ECB's bond buying spree. Who's next? It appears the dominoes are starting to fall. And, what happens when the 115 billion euro cushion expires? Is that when the ECB finally joins in the money printing parade?

I, for one, believe the entire world will embark on some variation of Quantitative Easing. That spells global inflation. Some are of the opinion that when Europe prints money, the resultant appearance of dollar strength will drive down the gold price. The charts beg to differ.

Prior to the most recent Bank of England's printing of 75 billion pounds in early October, the gold price rested below the $1600 per ounce level. Today, even after the retracement of the last two days, the gold price sits near $1750 an ounce. It is hard to make a case that foreign printed currency somehow erodes the gold price. Inflation is inflation and if it's foreign inflation (through new QE measures) that drives the dollar higher, then gold becomes cheaper to foreign investors who hold dollar reserves.

Like they say, it's always midnight somewhere. So it is with gold. Somewhere in some currency it is cheap. Cheaper gold means higher demand which then leads to less supply and more upward price pressure. And the parade marches on.

Is the gold price about to break loose to the upside? Is the dollar's recent strength just smoke and mirrors? Check out this FREE Video and see for yourself.

Lear Capital: Is it Gold to the Rescue?

Tuesday, November 1, 2011 by David Engstrom

In recent days, newsletter writer Dennis Gartman, reversed his call on gold saying, "The authorities have no choice but to inflate their way out of the morass that they’ve found themselves falling into and that shall mean the diminution of currencies generally and the advancement of gold as the only currency not diminished."

Not to be outdone, James Turk, renowned gold market analyst and fellow newsletter writer, recently joined the chorus making a case for gold at $11,000 an ounce. Turk is hardy alone in his lofty predictions as numerous well-known writers and analysts agree with the prospect of gold at $10,000 an ounce or higher.

Is this possible? Is this why you should own gold?

Let's put things into perspective. Since the credit crisis began, gold prices have more than doubled, up 125% even after today's pullback. Custom Chart Maker Meanwhile, the Dow is down 16%, the S&P is down 21% and the NASDAQ is down 6%. To arrive at these current standings, $11 trillion of printed money has been pumped into the economy. Oh, and by the way, that was 7 million jobs ago.

Basically, we're in worse shape now than we were pre-crisis which begs the question. Do we pull the plug on any further stimulus and risk depression or do we print more money. Either way gold is in a win win situation. We know what gold can do if we stimulate. What we can only imagine is how high gold will go if we don't. Stocks on the other hand appear to be in a lose lose position. We stimulate and they lose a little. We don't stimulate and they crash.

Do the math. A stock portfolio diversified with 20% gold at the outset of this crisis could have been rescued from negative returns. So while it may be exciting to speculate about $11,000 an ounce gold, the real reason to own gold is to be diversified into something that has potential to rescue your other investments if the worst comes to pass.

Jim Grant is interviewed on the subject of inflation and says: “…there will be a lot of it suddenly.”

Monday, October 31, 2011 by Eric Harding

Blog Photo Jim Grant is a calm steady voice that investors have known to count on for decades. If you watch this video, you will see what I mean. However, even a calm steady voice can sound quite the alarm about inflation. Jim is asked his views, on this subject. His answer is this: “My expectation about inflation is that there will be a lot of it suddenly.”

I am certainly in agreement of that! One of my best friends calls the great grocery store Whole Foods “whole paycheck” for a reason! How are you protecting yourself from the current inflation and the coming sudden inflation? Is physical gold in your portfolio? If not, call us today at Lear Capital!

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: In Gold We Trust In the Dollar We Bust

Thursday, October 20, 2011 by David Engstrom

FREE Video - End Of The Dollar!

Where did gold get its inherent tangible value? Why has it been so pursued throughout history by kings and kingdoms and those who would serve the realm?

To find gold's origin as money, at least as it relates to those who recognize the Holy Bible as God's word, we find that God wasted no time in conveying the importance of Gold. It's "goodness" if you will. The first reference to gold is found in Genesis, right after an account was given of the creation of Heaven and Earth, of man and then the garden within which man would reside.

Here we are given detail about the river that flowed from the Garden of Eden. As it flowed from the garden, the river divided into four headwaters, the first of which flowed through the land of Havilah where there was gold. And God said, "The Gold of that land is good." - Genesis 2:12.

The premise God set here, that gold was “good,” served to direct man in the creation of a system of fair weights and measure. Because God said gold was good, gold became the foundation of that system. God’s word made it valuable. And so has it been for 5,000 years, that gold is money. You can't print it, it does not represent debts owed, nor can it be debased through inflation. You can trust it. IT IS MONEY!

Now the dollar.

As evidenced by the volatility of today's markets, there is a growing sentiment that all is not well with the economy and the dollar that fuels it. As each week passes, we lose more jobs, we inch closer to the outbreak of the Euro plague and we realize that relief from inflation is only transitory.

It's like a giant screw going into the ground. We lose jobs, the markets decline and as markets decline we lose more jobs. All the while, rising inflation takes another bite out of our purchasing power, housing takes another hit, which in turn shrinks the economy and puts more downward pressure on stocks. One more turn of the screw.

Wake up America! Smell the dead fish! The 2008 crisis came with little warning and wiped out trillions of dollars. Now the warnings are everywhere.

Honestly! Has any financial problem, arising out of the 2008 crisis been solved? Sure we kicked the can down the road, but the real problem of uncollateralized debt has not gone away. In fact, right now there is more of it and more keeps getting piled on.

There are two realities that must be faced. We either need to print more money in hopes that one of these extra trillions pumped into the economy will finally be enough to kick-start it, or, we have to default on debt and wipe some of it off the books. Great choices, eh?

There isn't a bigger rock or a harder place to be caught between as even cursory analysis of the two realities leaves only one truth. Default is imminent. If we print more money that is nothing more than a default on the value of the dollar. Printing money debases currency and when you repay loans with dollars that are worth less than those borrowed - that is default.

Realizing this helps to explain a lot. For example, central banks, who are flooding the world economy with printed money, realize they are likely to be repaid with currency that is worth less than that which was loaned. So, how do they hedge against that sure loss coming some time down the road? They buy gold. That's a pretty easy strategy to understand. If you get paid back the loan, your gold serves as a hedge against lost currency value. If the borrower defaults, you have the collateral used to secure the loan and gold to hedge against any lost value of the asset.

This may be the single best reason to own gold right now. There is no end in sight to central banks' efforts to pump more money into the global economy. It would be foolhardy to believe you can just print money knowing when you get it back it will be worth a fraction of what it was worth when it was released.

As Europe contemplates a money-printing solution to their own looming crisis, all markets remain at a veritable standstill. Gains one day and losses the next. We're a giant yo yo with Europe pulling our string. Will they print more money or default? Given the two choices for default, I believe printing money is the slower less obvious means to default. It appeases the global markets and the masses for a short time but the aftershocks are unavoidable. Debt will rise and the day of reckoning will arrive with much greater vengeance . . . some day.

If Europe prints more money, that opens the door for our own Fed to print more money. Nobody wants the strongest currency in the world. A weak currency is key to making your own exports more profitable. . . and then there's that debt thing. A weaker dollar makes it easier to pay off debt and, as Bill Gross of PIMCO reminds us from time to time, the true debt level of the U.S. is some $75 trillion, making the U.S. the largest debtor nation on earth.

As exposed in a new blockbuster video, The End of The Dollar, (it's FREE) the per capita debt in the U.S. is $45,000, not considering unfunded liabilities for Social Security, federal pensions, veterans benefits and so on. Throw that in and you get a number closer to $250,000 per citizen. In Greece that number is only $44,000.

As jobs data, housing prices and falling consumer confidence indicates, we are at the brink of total economic failure. That's why the Fed may have no choice but to make one final life or death trade, the life of the economy in exchange for the death of the dollar. What will you trust to carry you through retirement? Will you survive the End Of The Dollar?

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Lear Capital: The End of the Dollar and Beginning of Gold as Money

Tuesday, October 11, 2011 by David Engstrom

Dave Engstrom
FREE Video! EndOfTheDollar.com The Beginning of Gold as Money

Are Fed Actions about to crash the dollar, gut your savings and retirement accounts and send gold to record highs?

As Europe now heads down the path of printing money and bank failures, the European currencies are sure to weaken, showing temporary strength in the dollar.

Many believe that will be just the opening the Fed is waiting for to announce its next stimulus plan. Most believe more stimulus is a foregone conclusion, one the Fed arrived at weeks even months ago. But, with so much political pressure against more borrowing and more debt, the Fed has been forced to sit with hands cuffed and watch the economy and the markets deteriorate.

On October 4, 2011, during a Joint Economic Committee hearing, Bernanke tipped his hand and indicated the central bank has more bullets to fire in the battle against market and economic collapse.

Immediately the markets reacted and moved higher, as if to send a signal back to the fed approving the notion. Let's face it! The Fed has no choice! Either create more fake money or watch the markets and the economy plunge into the worst depression in history.

Numbers don't lie. There's no job growth, housing is now described as being headed for a triple dip and European banks filled with toxic assets are beginning to fail. Are U.S. banks headed for the same fate?

A new blockbuster video shows why the Fed is preparing to make one last life and death trade. The financial life of our economy in exchange for the death of the dollar.

Wake up America! The 2008 crisis came with little warning and wiped out trillions of dollars overnight. Can you afford another wealth wipe-out?

Visit EndOfTheDollar.com. See why the Fed has no choice but to take actions that will gut your savings and retirement accounts of their purchasing power.

Learn how to profit from a dying dollar, how to turn inflation into wealth and why the Fed may be forced to take actions that will send gold prices to record highs.

Don't be a victim - be a survivor! Visit EndOfTheDollar.com.

“….free money for the rest of us.” And just where this line of thinking could put us!

Tuesday, October 11, 2011 by Eric Harding

Blog Photo I find it disturbing that statements like this are being run-up-the-flagpole. In the guise of social change, this is openly being discussed. It is not my job here to pontificate on social issues, but economic ones – YES!

Robert Murphy wrote yesterday for Whiskey and Gunpowder an article entitled Inflationists in Wolves' Clothing as he took issue with economists calling for more helicopter money. Just reading the term “free money” makes me want to count my stack of gold coins!

He concluded: “The world has been in a strange environment in the last three years, in which massive expansions in central-bank balance sheets haven't led to $10 gasoline and $5 loaves of bread (my add here – not yet!). Regardless of which school of thought can best explain these events, we are all going to rue the fact that the grand lesson flowing out of this episode is that money printing can bring prosperity. Now that this idea has firmly taken root, it will take a large collapse in consumer purchasing power to remind everybody why "inflation" used to be a dirty word.”

Before you hear more misguided economists ask for more helicopter money, put your hard earned money into physical gold with us here at Lear Capital!

Lear Capital: Gold Whispers - "Nothing has Changed"

Friday, October 7, 2011 by David Engstrom

(FREE Video "End of the Dollar" signals Beginning of Gold as Money)

While analysts vacillate back and forth over data, market direction and the economic outlook, Gold seems to be whispering, "Hey nothing has changed. There is no evidence of an emerging bear market in precious metals."

Today, non-farm payrolls came out and it appears as though we have added 103,000 jobs. The panel of talking heads I watched this morning, tried like heck to make it sound like this was a good number. Was it really an improvement?

According to some Bloomberg data gathered, this number should have investors in the markets running for the exits toward the theater now playing, The Revenge of Gold. The Bloomberg data I refer to was released in a report dated August 1, 2011, in anticipation of a July payrolls report. July payrolls came in at 117,000. This number brought the average of newly created jobs to 53,000 per month for May, June and July, down significantly from the average of the three months prior of 215,000 jobs.

At that time, this was interpreted as a bad number. Bloomberg reported then it would take an average of 125,000 new jobs created every month to keep the total unemployment rate steady. To shrink the unemployment rate by one full percentage point would require payrolls to rise an average of 200,000 per month for an entire year. So, as the data today (103,000) may have been better than expected, it is still not even enough to maintain the current unemployment rate of 9.1%.

The immediate response in the markets saw stock indexes rise along with gold and silver. As I write, reality seems to be setting in as a sell-off is underway. Yes, Gold is also off on the day as investors are forced once again into a profit-taking mode. The last 2 days saw gold prices rise $56 an ounce by early trading this morning. That's a 3.5% gain in virtually hours, a percentage gain that can easily set off a flurry of profit-taking trades by those now scrambling to show annual profits.

Regardless of gold's recent pull back it is still up 25% from its January lows while stocks are down. The S&P is down 10.5%, the Dow 6.7% and the NASDAQ is down 8.5%. Time is running out for fund managers to show an annual profit if they intend to rely on stocks to report gains.

All this begs the question, where to from here? Where will you place your next savings and retirement bet? With jobs on the decline, housing mired in residue mortgage scandal for the next 10 years and the markets indicating over and over again that they cannot rise without printed money, what can we reasonably anticipate for the future of our economy and the markets?

The Fed has already indicated its willingness to print more money if economic data remains weak. There's that little voice again, "nothing has changed." As we head toward election year, we can reasonably anticipate some measures to be taken to stimulate the economy. Printing money is at the top of the list. Whether it be called quantitative easing or "measured dollar default" my bet is that Europe's economic troubles will translate into more printed European currencies. This will indicate dollar strength in the short term and open wide the door for the Fed to print its guts out. How dare anyone try to foil the Fed's plan to inflate our debt away. While this may be bullish for stocks in the short term, it is explosively bullish for precious metals.

But, don't take my word for it, there are some pretty high-powered analysts that also see much higher gold prices ahead. In another Bloomberg report just this morning, we read, “Gold and silver are our top commodity picks heading into 2012.” Targeting gold as high as $2464 and silver at $50 an ounce in 2012, analysts credit the European Debt Crisis as being a major catalyst driving both gold and silver prices higher.

There's that little voice again, "nothing has changed." Still, investors remain paralyzed. Even as we watch stocks disintegrate, and real estate implode even further, it is hard to put faith in anything. Do I believe Morgan Stanley, who sees another 35% rise in gold over the next 12 months? Do I trust the data that no matter how you look at it screams, "own some gold." Or, do I yield to the emotions invoked by the parade of media experts that cling to the stock promise and never broach the subject of total financial collapse.

I would submit, not knowing is dangerous. It can only lead to another 2008-like surprise. I say dig dig dig until you have enough information and enough data to feel like you can make an informed decision instead of an emotional one. Now is not the time to stick your head in the sand. Open wide your eyes and dig up the data on gold demand, see that it is rising. Find evidence yourself that indicates whether the Fed is about to print more money. Then answer for yourself the question, "Is inflation more or less of a risk than we are led to believe?

At LearCapital.com you can find hundreds of articles and special reports that can put you in touch with data provided by dozens of experts. A brand new FREE video is also now available at the EndOfTheDollar.com that shows why our dollar may be breathing its dying breath as inflation destroys the purchasing power of our paycheck and our savings and retirement accounts.

Listen to the little voice, "Nothing has changed."

Lear Capital: The Gold Rally is Over - You Can all Go Home Now!

Thursday, October 6, 2011 by David Engstrom

Do you believe that for a second? Do you think I do? Absolutely not. But, what if it was? What would that mean? It's often suggested that I am just the eternal optimist when it comes to gold - a true gold bug, if you will. However, as I have said on a number of occasions, I long for the days prior to the 2008 credit crisis. Yes, those were the days. Credit was cheap, real estate offered many opportunities to buy, build, sell, rent . . . you name it. And stocks! A monkey with a dart board could pick 'em. Even gold was on the move as those wary of inflating bubbles were not totally buying into the Shangri la theory that most investors embraced. It was hard to be in the wrong business.

Then BAM! Seemingly, overnight, home values were cut in half. Commercial and residential construction sites were abandoned leaving half-done jobs standing as though aliens abducted all the workers. Perhaps worst hit were stocks as we watched them fall from all-time highs. Investors realized, much of their wealth was borrowed and the time had come to cover margin calls. Sell sell sell was the cry! Then the crying.

And what about gold? Even gold got hammered. Right in the middle of a bull market that saw gold prices rise above $1000 for the first time ever, gold prices dropped more than 20%. If only the Mayans could have left October of 2008 off the calendar, maybe the devastation could have been avoided.

Then, to the rescue came the Fed and government with printed money to fuel a rebound. This was a crucial time for all of us as we scrambled to find an investment we could rely on to take us the rest of the way to retirement. Some went back into stocks and stocks moved higher. Others stuck with gold and were vastly rewarded as the gold price, since that major pull-back, has doubled, far outperforming any rebound in stocks.

Now, as the economy and the markets come down off their printed money high, Gold and precious metals prices have once again pulled back. This would be the fourth major pullback since the bull market started in 2002. A bull market in gold that has seen prices, even at today's levels, rise more than six-fold in less than 10 years. So Really! Is the Gold rally over? Or may this be the opportunity of a lifetime to take advantage of what may well be just another routine pull back in metals prices?

Fast forward! What do you see? Do you see $15 trillion of debt vanishing overnight? Do you see job growth, a housing rebound and economic recovery without more printed money being injected into every arm of our economy? Or, do you see the birth of inflation, perhaps hyperinflation, brought on by massive printing of world currencies and especially the dollar?

It does not take an economic genius to recognize the death of the dollar, as chronicled in a new video at EndOfTheDollar.com, is occurring right before our eyes. Do yourself a favor and take a close look at how monetary policies have affected the markets, the dollar and gold over the last 10 years, then decide where to place your bets to protect the future purchasing power of your savings and retirement accounts.

Lear Capital: Is Gold Rally Losing Steam or Building Pressure?

Wednesday, September 21, 2011 by David Engstrom

The great debate is on! Is the gold market a bull or a bear? To answer we must first settle on the issue of whether or not anything has changed over the last 3 years. Let's start with jobs. Are we adding or losing? Today, we learn Wall Street jobs are now on the chopping block. In a place where the bottom line is all that matters, the need for a higher one is about to supersede the need for employees. The contagion is spreading.

Reports suggest, Bank of America alone is considering the elimination of 40,000 jobs. In March of this year Wells Fargo announced its own intentions to cut jobs. Goldman Sachs, HSBC, Barclays have all followed suit with announcements of their own.

Last week jobless claims rose an unexpected 11,000. Although the official unemployment rate of 9.1% did not change, skepticism over economic recovery grows as the official numbers are believed to fall short of actual numbers. By failing to count those who are now deemed discouraged workers - someone whose unemployment benefits have expired - the data remains unreflective of the actual number of people out of work. That number is growing.

How about housing? Sorry, yesterday August housing starts came in down 5%. Other reports show a wave of foreclosures may be about to roll over banks with a potential loan loss of over $1 trillion. Some believe Bernanke is about to address this situation specifically by driving down interest rates even further. Is a 2% 30 year fixed rate mortgage in the offing? We'll see!

Finally, let's look at the markets over the last 3 years. The Dow - flat! The S&P - flat! NASDAQ - Up 18% with 15% of that increase coming in the last 30 days. Thank goodness for Apple and Google, up 25% and 15% respectively, over the last 3 months. Let's face it, the outlook for declining jobs does not bode well for the future profitability of the markets.

Finally, let's take a look at precious metals. Over the last 3 years gold has doubled and in just the last 12 months silver is up 80%. As gold has fallen from its recent high of $1923 an ounce, it's as though the whole world is in limbo waiting for the next sign that the bull market in metals is still intact. As I see it, the evidence is overwhelming that it is!

Nothing has changed except that the national debt is higher, deficits are growing, global defaults of some sort seem imminent and the future of the dollar as the world's reserve currency is in serious question. Meanwhile, back at the ranch, the call has gone out for a return to the gold standard. Steve Forbes, Congressman Ron Paul and China all seem to be beating the same drum. Yes, China is said to be amassing huge gold reserves in an effort to back its own currency and begin replacing the dollar as the world's reserve currency.

Gold price predictions are flying, with some of the most conservative calling for gold above $2000 by year-end. However, the entire world seems to be sitting on a debt time bomb. All eyes are on Europe as it struggles to free Greece from its shackles of cold hard debt. That situation is about to explode. You'll recall at the outset of the Greek crisis, and long before gold even surpassed $1500 an ounce, the Greeks were buying gold at an equivalent $1700 U.S. Dollars per ounce. The Greeks were panic gold buying months ago. It looks like they knew then what's about to happen now.

Clearly, the only way out of this global financial crisis is to keep printing money and inflate our way out of debt. The Fed seems headed in that direction. With Gold prices significantly off recents highs, now may be a great time to consider adding gold to your savings and retirement accounts. For the latest real time prices on bullion and all your favorite coins visit LearCapital.com today.

Lear Capital: UBS Totally Blows The Call On Gold

Thursday, September 8, 2011 by David Engstrom

Today the story hit, Swiss Investment Bank, UBS, has raised its gold forecast for 2012 to $2075 an ounce. This represents a 50% increase over its prior prediction of $1380. Wow! They really went out on a limb on that one. Given the Gold price passed the $1380 mark about 9 months ago and has since topped $1923 an ounce.

Talk about doing a 180. It was just this last July when managing director Peter Hickson, at least according to China Business News, said gold had peaked and was set to plunge to $1000 an ounce. My question is, what happened in the last 2 months to so drastically revise these claims?

If I were to speculate, which is all I can do since my crystal ball cracked, I would say, either UBS had an awakening and actually sees the price headed much higher. Or, that the earlier comments were some kind of effort to suppress the gold price and create a buying opportunity. Why create a buying opportunity?

Just two days ago the Swiss National Bank announced it intends to make moves to devalue the Swiss Franc. I think I get it. It's more expensive to buy gold after you devalue your currency than before. That's what happens here when we print more money - gold goes up in dollar terms.

This recent Swiss move adds more evidence to the theory that there is an international race to debase in order to inflate away debt. A strong currency hinders exports and the ability to repay debts, public or private. I think we all look forward to being able to repay today's debt with tomorrow's cheaper dollar.

Once you come to the realization that a weak currency is preferable to everyone, it's easy to see how and why gold could keep rising well beyond this recent UBS prediction.

The Swiss are very shrewd business people and I can't help but think there exists an ulterior motive to such a ridiculous about face. In September '02, the SNB announced plans to sell 283 tonnes of gold by September '03 as part of a plan to rid itself of 1,300 tonnes of "unneeded reserves" by 2005. Wonder what they think about that move today? And, why make the announcement ahead of time when you know such news could inhibit a trend of rising gold prices?

Today, the World Gold Council reports that indeed Switzerland has reduced its physical gold holdings from 2590 tonnes in 1999 to 1040 tonnes by August 2011. However, I came across a curious report that indicates the SNB, may have, once the planned sale of physical gold was complete, embarked on a plan to acquire paper gold.

Check out this report on SNB reserves. The entry found at "Gold (including gold deposits and if appropriate, gold swaps) and you see that purchases of gold via vehicles that carry maturity dates, has skyrocketed since 2005. At the same time, the entry shown as "Gold (including gold deposits and if appropriate, gold swaps): Weight in thousand fine ounces" appears reflective of the SNBs 60% reduction of physical gold holdings since 1999.

Keep in mind, paper gold could be shares of an ETF that holds physical gold. Has the SNB cleverly disguised its accumulation of gold? If this is true, another UBS Gold Price Prediction could fall well short of its recent public announcement. Stay tuned here and if you don't yet own gold you getter get some before the Swiss corner the market.

Lear Capital: Gold Goes From Zero to Hero In Media

Thursday, September 1, 2011 by David Engstrom

One minute, gold is being bashed by a parade of experts across the TV screen proclaiming the gold bull market is over. The next minute, Gold is deserving of its own TV Special and cleverly disguised ads for Gold Stocks, Gold ETFs . . . in general, paper gold.

To see gold cast in such a brilliant light in the media causes me to pause and wonder. Has the media finally capitulated? As I write, a giant headline appeared on TV, "The New Gold Rush!" Talk about an about face from a hundred references to a "Gold Bubble." Something is different.

Perhaps the media is just finally tired of being chumped by gold's resilience and unstoppable climb higher. Personally, I think it's a little bit of that but with a little twist. Believe it or not, TV is in the business of TV to sell advertising. Where once, monster banks and gigantic publicly held companies could spend millions building image, budgets for branding aren't quite so fat anymore.

If gold is going to be the new investor darling, constant reminders that gold prices could be crashing do not make for a very conducive environment for gold advertising. Hence, a slight change in attitude. We could be seeing a case where the cheerleaders have quit their team and gone to the other side of the field.

What's next? A Gold ETF reality show? A sweepstakes to win a FREE trip to a gold mine? In China, citizens are instructed to buy a little gold to protect against uncertainties in the markets and the economy. What do you think would happen here, if anyone -- I mean ANYONE in any official capacity, came out and said, "hey folks, in case you haven't noticed, we're having a little technical difficulty in our economy and our markets, maybe you should own a few pieces of gold and silver?"

I doubt we'll ever hear that exactly. You're going to have to read between the lines to get the message. Unless, of course, you just believe me when I tell you go get a few pieces of gold and silver because, in case you haven't noticed, things are a little rough in Mudville.

I suspect what will ensue in the media, is the classic Physical Gold vs. Gold Stocks or ETFs arguments. Suffice it to say, I have my opinions and you'll hear plenty of them. Aside from that, however, I see all gold investors benefiting from the added attention now being given to Gold. I see the time has arrived when gold is revered not reviled, respected not rejected.

No longer will gold investors be only those who constantly predict doom and gloom but those who accept the reality that we are in debt so deep, the only way out is through printing of massive amounts of money. I believe the goal is to inflate our way out of debt. I have shown the markets want it, the Fed supports it and the administration demands it. This all creates an environment where gold thrives and the price booms.

Is it too late to own gold? Not in my opinion. To me it looks like the time has come to embrace the hero that has come to rescue savings and retirement accounts from the disintegrating effects inflation can have on the purchasing power of your savings and retirement accounts. So what if you've saved a few hundred thousand dollars if it takes a wheelbarrow full of cash to buy a loaf of bread. The time has come to develop your own strategy for diversifying at least a portion of your assets into gold.

Lear Capital: Is Gold Set To Drop Like a Rock or Rise Like a Rocket?

Monday, August 15, 2011 by David Engstrom

The cheerleaders are at it again. "Wow look at that S&P soar. It's about to break through 1200!" Then there's gold. "Gold has fallen $73 from its high - is it set to drop like a rock?"

These are headlines and comments made this morning by some of the talking heads. The suggestion is clear, now is the time to own stocks and bail out of gold. What's your call?

Before we even attempt to answer let's ad a little perspective to the issue of stocks versus gold. Less than a month ago the S&P traded at 1345. As it trades now it has fallen 11.5% from that level. Gold on the other hand is up 8.7% in the same period. That's after the $73 drop from its recent new record high.

Now let's look at why the S&P is trading so far off its recent high. Generally, I believe stocks are off because the risk of losing stimulus, (printed money) has risen. In my recent article, the charts tell the story. When the supply of printed money has been threatened, markets have dropped. Since June, the threat has come from two fronts. First, with the expiration of QE2 and then with the potential that the debt ceiling would not be raised. All of this has left the S&P down more than 5% for the year.

Will the S&P recover some value as more stimulus programs are announced? Probably! But, do you see it as anything more than a short-term play?

Gold, on the other hand, is up 24% on the year as the act of printing money, in the long term, destroys the purchasing power of the dollar. In this regard, both stocks and gold prices respond favorably to printed money. But, here's what separates the two. When you threaten to cut off the supply of printed money, gold still keeps rising as the potential for debt default now enters the scene.

If you listen to the media, it seems, no matter what, it's always a good time to buy stocks and gold prices are always on the brink of dropping like a rock. We've been hearing it for 10 years as we watched gold rise 500% and stocks barely hang on to zero gain.

That's ZERO gain in 10 years for stocks, even less when you add some inflation into the formula!!

Now, take a look at all the conditions under which gold has risen and stocks have fallen over the last decade and project 3 years, 5 years or even 10 years ahead. Do you see anything different than we have seen over the last 10 years?

If you see more of the same, why should we believe stocks are a good long term bet for your money and gold is not? At the very least, the performance of stocks over the last decade, as it compares to gold, should be the best argument for diversification into precious metals. Don't sell all your stocks. Don't give up on America. This is not the message. The message is diversify. Do the math. A stock portfolio diversified into just 10% precious metals 10 years ago could be up 50% right now. That's right! Up 50%!! Follow along.

Let's take a $10,000 self directed IRA. In 2001 if you had $9,000 in stocks and $1,000 in gold bullion, the portfolio today, on the stock side, could still be worth about $9,000 but on the gold side your gold bullion (Yes you can own physical gold in your IRA click here for details) could be worth in the neighborhood of $6,000 depending on the exact type of bullion or bullion coin held.

Is gold set to drop like a rock? JP Morgan says $2500 by year-end, Deutsche Bank called for $2000 by year-end, and now Bank of America has raised its gold price prediction to $2,000 in 12 months. So, if gold does drop like a rock watch out out cause it could turn around and rise like a rocket!