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Welcome to the "Wolf Creek Pass" School of Monetary Policy

I don’t know if you folks remember that hit ditty: a humorous tune about two truckers attempting to manhandle an out-of-control 1948 Peterbilt down the “other side” of Wolf Creek Pass – a death-taunting section of U.S. Highway 160 where the elevation drops a hefty 5,000 feet in a relatively short distance.

The song’s two characters – a truck driver named Earl and his brother, who’s his partner as well as the song’s narrator – are taking a flatbed load of chickens on a speedy trip down this winding, two-lane Colorado highway. After the narrator gives Earl the above-mentioned warning, the ancient semi’s brakes fail.

From there on down, the narrator tells us that the brothers’ trip “just wasn’t real pretty.” The truck careened around hairpins and switchbacks, and then raced at an uncontrolled 110 mph toward a tunnel with “clearance to the 12-foot line” – with chicken crates sadly “stacked to 13-9.”

The drivers and the runaway Peterbilt “went down and around and around and down ’til we run outta ground at the edge of town… and bashed into the side of the feed store – in downtown Pagosa Springs.”

Believe it or not, I started thinking about this funny old country tune the other night – right after I’d read a piece about QE3 and the U.S. Federal Reserve.

As zany as it first sounds, the parallels are striking.

  • Gold Prices

  • If You're Worried About Gold Prices, You Need to Read This After an especially ugly day for gold investors on Monday, the "yellow metal" has now entered a "bear market". As of yesterday, gold is down 26% from its record close back in August 2011.

    To get some expert insights on this sell-off, I telephoned Peter Krauth, our resident natural resources expert and editor of our Real Asset Returns research service.

    I asked Peter for his insights on the following three questions:

    • Why gold is selling off.
    • What you can expect from here.
    • And what investors should do now.
    Here's what he had to say... Read More...
  • Investing in Gold: Here's What to Do Now Gold Price trends this year

    Monday's drop in gold prices was the largest one-day plunge since February 1983 - which led many of those investing in gold to bail on the yellow metal.

    Gold prices tumbled $140.40, or 9.4%, to $1360.60 an ounce. This brought the two-day decline to $203.70, or 13%.

    On Friday, we outlined recent factors driving gold's price plunge:

    • The Federal Open Market Committee (FOMC) meeting minutes that came out last week suggested the central bank may start scaling back its monetary stimulus measures later this year, reducing inflationary pressures.
    • Goldman Sachs Group Inc. (NYSE: GS) last week cut its 2013 average gold forecast, for the second time, to $1,545 from $1,610. Investors like to dump the metal after the release of bearish research.
    • There have been rumors financially strapped Cyprus was selling 400 million euros of gold, 75% of its reserves to raise cash.

    Gold prices ended the drastic two-day decline Tuesday, up nearly 2% to $1,387.40.

    To continue reading, please click here...

    Read More...
  • Keith Fitz-Gerald on What's Driving Down the Price of Gold video-keithfitzgerald-gold-prices-falling

    Investors want to know: What's driving down the price of gold - and how long will the plunge last?

    Gold prices tumbled Monday by more than 9% - the biggest percentage drop in 30 years.
    The yellow metal had fallen to just above $1,360 an ounce Monday afternoon.

    To continue reading, please click here...

    Read More...
  • Why Gold is Going Down Gold crash

    Gold and silver are taking it on the chin again today - leading many readers to keep asking me why gold is going down, and how long the plunge will last.

    Gold futures today (Monday) logged their biggest decline since the 1980s, falling $140.30, or 9.3%, to $1,361.10.

    What's up? Or rather, what's down?

    On Friday, I went into a few reasons why gold is going down to provide some understanding of the action.

    But with still further weakness, I'd like to delve in a little more, without repeating myself.

    Why Gold is Down

    You see, general markets are selling off today too, and even oil has lost $6 per barrel since Thursday.

    Though off slightly, the U.S. dollar has maintained strength, probably thanks to speculation the U.S. Federal Reserve may end its quantitative easing sooner than previously expected. That hurts commodities which are all priced in U.S. dollars.

    There's also been a considerable amount of selling of gold exchange-traded fund holdings, which has forced those ETF managers to sell their physical bullion. That has temporarily added supply to the market, which helps push gold's price down.

    To continue reading, please click here…

    Read More...
  • Why Are Gold Prices Down? gold

    Gold and to a lesser extent silver got hammered pretty hard today (Friday) - leading many of our investors to write in and ask why gold prices are down so much this week.

    Gold closed Friday at its lowest level since July 2011. In the last two days, gold was off about $70 and silver off about $1.60 at their worst points.

    So what's going on?

    Well, in the search for answers I can see a few reasons.

    It started Tuesday, when UBS cut its average gold price forecast for 2013 to $1,740 from $1,900. UBS cited risks the U.S. Federal Reserve would end its current QE sooner than expected, a move into equities, low inflation, improving economic growth, and a stronger U.S. dollar.

    Then Wednesday, the leaked Federal Open Market Committee (FOMC) meeting minutes showed that several members believe the costs of the $85 billion monthly bond purchases outweigh the benefits. We're being led to believe that "many participants" think improving unemployment could justify slowing up on bond-buying "at some point over the next several meetings."

    Remember that these are not minutes where members' comments are actually written down word-for-word (like they ought to), these are carefully crafted statements to influence opinion. The Fed is known to try to "manage expectations, so it wants it to look like bond-buying will end sooner than later.

    But I, for one, don't buy it.

    To continue reading, please click here…

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  • Goldman Sachs Is Manipulating Gold Prices Right Before Your Eyes Company GS

    If you want a lesson on how to manipulate gold prices, you need only look at what Goldman Sachs Group Inc. (NYSE: GS) has been doing over the past few months.

    Goldman set the table by predicting a turn in gold prices back in December 2012, which no doubt contributed to the precious metal's 5% decline in the first two months of the year.

    At the end of February, Goldman issued a research report that said the big Wall Street bank had soured on the yellow metal, and dropped its three-month target for gold prices from $1,825 an ounce to $1,615, its six-month forecast from $1,805 to $1,600, and its one-year outlook from $1,800 to $1,550.

    Then, just yesterday (Wednesday), Goldman doubled down on its negative outlook for gold prices.

    The bank's new targets for gold prices are $1,530 in three months, $1,490 in six months and $1,390 in one year.

    The double whammy - two downgrades in two months - had its intended effect, as gold prices fell 2%, to $1,558.80, after Goldman released its report. It was the biggest single-day percentage drop for gold in nearly six months.

    "If you've ever suspected gold prices are being manipulated, you're not alone - and you're right, they are," said Money Morning Chief Investment Strategist Keith Fitz-Gerald.

    The proof is right in front of us.

    To continue reading, please click here…

    Read More...
  • Every Gold Coin Has Two Sides With inflation above the current interest rate, a negative real interest rate increases the attractiveness gold. Frank Holmes explains. Read More Read More...
  • This Gold Prices Chart Points to a Looming 24% Jump GoldPrices2001_2013

    Despite a pullback in gold prices, hold on to your gold. In fact, look to buy more.

    You see, thanks to record highs for the U.S. stock market, a notable shift from defensive assets to "risk-on" trades has occurred.

    The yellow metal slumped 1.4% to $1,552.80 Wednesday marking a nine-month low. That's after gold prices slid below $1,600 an ounce in Q1 on hints of a global economic rebound. The slide prompted market participants to shed gold holdings.

    It's "certainly understandable" for investors to have sold gold following a 400% appreciation over the last decade and move into stocks, said Malcolm Burne, chairman of the Golden Prospect Precious Metals investment trust.

    But, here's why the tide may be about to turn.

    To continue reading, please click here...

    Read More...
  • What Maslow and Rand Would Tell Investors Today (And How It Relates To Gold) The average investor has significantly underperformed oil, stocks, gold and bonds in the past 20 years. While, on average, investors returned 2%, oil, stocks and gold rose about 8%. Let's apply some psychology to find out why. Read More...
  • Does Investing in Gold Top Your List of "Best Investments"? gold

    Even though the Dow Jones Industrial Average and Standard & Poor's 500 Index have hit record highs this year, investing in gold remains the top investment pick in CNBC's latest All-America Economic Survey.

    The March poll shows the yellow metal is the favored investment choice among 35% of respondents, beating real estate at 27% and stocks at 21%. This is the second year that investing in gold has topped the list of what those surveyed consider the "best investment" to make now.

    While survey participants are more optimistic this year than last about the stock market, 21% are uncertain if now is a good time to dabble in stocks, up from 11% in December 2009.

    Those who believe the current environment make it a good time to buy stocks jumped from 31% in November to 40%, the highest amount since December 2009.

    Moreover, in spite of the improved outlook for stocks, the overall view of the current state of the economy remains bleak. Currently, 60% of those surveyed are pessimistic about the U.S. economy, up from 56% in November.

    To continue reading, please click here...

    Read More...
  • In Gold, Not Cyprus, We Trust The savings-seizing shenanigans in Cyprus just reinforced the importance of having gold and gold stocks in your portfolio. An indeed, with gold at extreme lows, now's a great time to buy more. Frank Holmes explains. Read More...
  • Gold Prices Will "Explode" When These Investors Start Buying Gold bars small

    Until recently, an entire class of investors that control a huge pool of money - more than $27 trillion worldwide - have almost entirely ignored gold.

    But lately, this group has begun to show more interest in the yellow metal, a trend that ultimately will exert massive upward pressure on gold prices.

    We're talking about pension funds, which typically have had little interest in gold.

    But with more traditional investments like bonds at historic lows, many pension funds aren't getting the returns they need to fund future obligations.

    And with central banks debasing most major currencies and risking higher inflation, pension fund managers almost have no choice but to consider adding gold.

    It's already started in Japan, which has about $3.4 trillion in pension funds - second only to the U.S., which has about $20 trillion.

    In response to Prime Minister Shinzo Abe's pledge to spur inflation by printing more yen, Japanese hedge fund managers plan to double their gold holdings from about $500 million to $1.1 billion over the next two years, primarily by investing in gold exchange-traded funds (ETFs).

    Itsuo Toshima, who represented the Tokyo office of World Gold Council for 23 years through 2011 and now advises Japanese pension fund managers, sees gold becoming a standard asset as inflation becomes more of a threat - with major consequences for gold prices.

    "Pension money invested in bullion is "peanuts' at the moment," Toshima told Bloomberg News. "If 1% of their total assets shift to the metal, the gold market would explode."

    To continue reading, please click here…

    Read More...
  • Is London Manipulating Gold and Silver Prices? Country England

    As we've explained before, manipulation of gold and silver prices is happening right here in the United States.

    Our Global Resources Specialist Peter Krauth interviewed silver market analyst Ted Butler last year, who explained how big financial institutions were using high-frequency trading to depress silver prices.

    To continue reading, please click here...

    Read More...
  • Can Gold Miners Increase Profits Through Spin Offs?

    After more than a decade of merger mania, gold miners are now looking to spin off some of their acquisitions.

    By doing so, the gold miners hope for better results after abysmal performance recently, as gold prices have fallen. And, as always, gold miners' profits rise and fall much faster than the yellow metal's price.

    The underperformance of the Market Vectors Gold Miners ETF (NYSE: GDX) compared with that of the SPDR Gold Trust (NYSE: GLD) bears this out. GDX is down 20.5% since the end of last year, while GLD is down 4.8%.

    Investors are starting to get really impatient with the gold miners - so much so that billionaire hedge fund manager John Paulson is arguing some of the world's biggest gold mining companies, including AngloGold Ashanti Limited (NYSE: AU), spin off some of the mines that they have acquired through M&A over the past 10 years.

    Paulson, the largest shareholder of GLD and AU, thinks the sum of the parts is greater than the value of the whole mining company. Paulson certainly can't be pleased with AU's 23.5% decline so far in 2013.

    Other gold majors, including Gold Fields Limited (NYSE: GFI) and Barrick Gold Corp. (NYSE: ABX), have already spun off some of their mines or are in the process of doing so.

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  • Don't Shy Away from Investing in Gold

    Gold prices were up today (Thursday) as the U.S. dollar retreated against other currencies, leading foreign buyers to favor investing in gold



    The most actively traded gold contract, for April delivery, rose $2.70, or 0.1%, to settle at $1,590.70 a troy ounce on the Comex division of the New York Mercantile Exchange.

    "The gold market is getting propped up by a break in the dollar index," Ira Epstein, director of the Ira Epstein division at the Linn Group, told The Wall Street Journal. "The problem is, people are not buying into the rally, they're buying it on the dips."

    If gold prices cross the psychologically important $1,600-an-ounce level, confidence in investing in gold could strengthen.

    Until then, it looks like investors will stay busy trying to profit from the record-high Dow.

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