Gold and Silver May Be About to Launch into Orbit

A lot of gold investors have been scratching their heads over the inability of the precious metal to gain traction during a period of time when many underlying fundamentals should have supported the price of the yellow metal.

I don't think that's going to be the case for too long, as the underlying cracks in the global economy are starting to reveal themselves, as Asia is getting economically crushed, led by weakness in China, as well as Japan.

The U.S. has enjoyed a prolonged period of smoke and mirrors with its economy, which in light of the global slowdown, will soon be exposed as well.

This is preparing for a resurgence in the price of silver and gold, and those positioned to take advantage of that, could have one of the most explosive period of growth in this sector they've ever had.

As the stock market showed today, investors are very fearful of the bull market, which anything negative sends them scurrying to the sidelines, as bargain hunters scoop up their shares.

We're only just beginning to see this major correction and early stages of the next recession, and the combination of the deflating of the bull market and economic weakness ensures gold and silver are going to enjoy a long and profitable upswing.

I'm already in with my investments. It's now time to look seriously at allocating capital to the two precious metals before prices really take off.

China and its Focus on Boosting Consumer Demand

China is a complex country to analyze, not only because the economic data released from the country is not considered reliable, but also because it is going through some major changes at this time, which have significant implications for investors around the world.

The major adjustment by China for its economy is its decision to rebalance it by focusing on consumer demand to drive growth in the country, rather than to be reliant on exports and investments as it has been in the past.

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Teck Resources (NYSE:TCK) Freeport (NYSE:FCX), Bucyrus (Nasdaq:BUCY) Up on China Production

Teck Resources (NYSE:TCK), Bucyrus International, Inc. (Nasdaq:BUCY) and Freeport-McMoRan Copper & Gold,(NYSE:FCX) all made nice upward moves Monday as China's production increased more than expected,

Industrial production grew 13.9 percent in August, beating average estimates of 13 percent from Bloomberg analysts.

China has been interesting because they seem to be sending different signals as time goes on, with a signal they're going to slow hammering the markets, and data showing growth, of course, doing the opposite.

There is no doubt China has been cutting back in urban infrastructure and property, but they've said they're looking at now expanding projects to rural areas, which they may have possibly already started to do.

Every time the underlying weakness of the global economy is exposed, data will be released which seems to contradict, or at minimum, confuse the situation.

It's dubious as to the growth in industrial production in China, but even if it's true, it does nothing to change the underlying weak fundamentals that haven't changed in any way.

Every time an alleged positive report or number comes out, the mainstream media pounces on it in order to give the appearance of a recovering economy in hopes of boosting the chances of the Democrats in the November elections in the U.S.

So we'll see this cat and mouse game go on until the elections, and whatever the outcome, the truth about the real weakness of the economy will continue to reveal itself.

For diverse mining companies like Teck, Freeport and Bucyrus, they'll continue to run the financial and economic data roller coaster until then.

Jim Rogers: “We never got out of the first recession”

In a telephone interview with Bloomberg, investor and author Jim Roger stated concerning the economic conditions, that “We never got out of the first recession," something we agree with heartily.

As we mention frequently, the GDP of the United States includes the stimulus spending in its results, and so makes things look better than they really are, masking the true state of the economy.

That's why most economic commentators continue to say we're in danger of a double-dip recession.

Stimulus money is leaving the economic system, simply revealing to us the state the economy has always been in.

Also in the interview, Rogers stated this concerning interest rates: “Everyone should be raising interest rates, they are too low worldwide. If the world economy gets better, that’s good for commodities demand. If the world economy does not get better, stocks are going to lose a lot as governments will print more money.”

“We never got out of the first recession,” Rogers added. “If the U.S. and Europe continue to slow down, that’s going to affect everyone. The Chinese economy is 1/10 of the U.S. and Europe and India is a quarter of China, they can’t bail us out.”

Concerning commodities, Rogers is still very bullish, and said even if they grow at a rate of 5 to 6 percent annually, they'll still surpass their all-time high, sometime in the next decade.

Rogers said he remains long on commodities.

JPMorgan (NYSE:JPM) Cuts China GDP Growth Estimates

JPMorgan Chase & Co. (NYSE:JPM) said in a note to clients Friday that they see China's GDP growth falling on the near-term “loss of momentum." That includes globally and in the U.S.

The banker sees this being the case through the rest of 2010 and until at least the end of 2011.

Their previous estimate of 10 percent has been downwardly revised to 9.8 percent for 2010, and as low as 8.6 percent, down from 8.8 percent, for 2011.

Much of this is in relationship to their battling the urban property markets which are in danger of becoming a bubble.

Companies providing materials in those areas could have their numbers impacted over the next year-and-a-half if these estimates hold up, or become even worst than expected.

Marc Faber Says China Growth Should Continue to Weaken

Market pundit Marc Faber, who publishes the famous Gloom, Boom & Doom report, said he sees the economy of China probably weakening over the next several months, and reiterated they could experience a property crash before the end of 2010.

The Chinese economy is already starting to show signs of slowing down, as recent reports say gross domestic product fell from last quarter's 11.9 percent growth to 10.3 percent over the last three months. Analysts had been looking for a 10.5 percent growth rate.

China has been projecting an 8 percent growth rate over the year, but at their current pace should still handily beat that, depending on whether or not the government takes any more steps to cool the economy off, especially the property market.

Some still think China isn't doing enough to slow the economy down, and it will ultimately experience a painful correction in response to that.

China has also been battling inflation, with a goal of bringing it down to 3 percent on the year, which they have now achieved, with it operating at a 2.9 percent rate in June.

The question is whether or not China has done enough to slow things down, and if the pace is low enough. Faber doesn't seem to think so, and he could be right, although, again, he sees it slowing down through the remainder of 2010.

Morgan Stanley (NYSE:MS) Raises Brazil Outlook

With the Brazil economy expanding at a larger-than-expected pace, Morgan Stanley (NYSE:MS) raised its outlook for the country in 2010.

The last 2010 projections by Morgan Stanley for Brazil were a growth rate of 6.8 percent, which has now been upwardly revised to 7.9 percent.

“The math changes, although our view ahead does not: Brazil’s economy is booming,” said Marcelo Carvalho, Morgan Stanley’s chief economist in Sao Paulo.

With China slowing down as a result of tackling inflation problems in their urban real estate markets, this puts Brazil in very close competition with the Chinese, who are expected to grow at a similar pace, down from the approximate 12 percent they had been growing at.