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.

Why Gold is Going to Soar

Gold is now trading at close to where it had been five years ago, as investors overall remain on the sidelines because of uncertainty surrounding the usual catalysts associated with a cyclical uptrend in the yellow metal; elements such as hints of a recession, market correction, proof of inflation, and a weak U.S. dollar, among other things.

Since the Federal Reserve has been the primary impetus behind the bull stock market, and it has resulted in interfering with the price mechanism of the market, it's difficult to ascertain its condition because of artificially low interest rates, which has encouraged some companies to take risks they may not have taken in a market that had more of an honest and measurable performance metric.

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Gold And Silver Prices In The Midst Of A Currency War

Since almost everything is perfectly aligned to produce rising gold and silver prices, many investors are baffled and frustrated over not only the lack of upward movement in the two precious metals, but the plunge in price for both of them.

Most mainstream media outlets point to the alleged recovery in the United States as a major reason, but that's in reality not even part of the equation. The reason a recovery is cited as important for gold and silver prices is the assumption the Federal Reserve will stop its easing program sooner than expected.

While there are all sorts of assertions of recovery thrown around in the financial media, most institutional and private investors know the difference, even if the general population doesn't. A so-called recovery isn't even part of the picture, and shouldn't be seriously considered in relationship to the prices of gold or silver.

The exception to that would be the industrial demand for silver which would result in higher silver prices. But there has to be an actual strong recovery for that to be considered in the price equation. Some may ask about the recently released job figures, which appear to confirm robust economic growth in the United States.

But the data aren't even close to being significant, as evidenced by the fact the participation rate of the labor force has plummeted to 63.5 percent; the lowest level since 1981. That is a big contributor to the 7.7 percent unemployment rate released. That and the quality of jobs and suspicions many of those getting jobs were actually obtaining second jobs because of the requirements surrounding Obamacare, which make the job numbers very dubious.

Another factor is the number of people no longer being counted in the labor force have jumped by almost 300,000 in January, which is larger than the alleged number of jobs created. Consequently, we must look past the headlines to see the actual data.

For example, a significant 48,000 of the jobs created were in the construction industry, which were the result of the $40 billion in monthly acquisitions of mortgage backed securities by the Federal Reserve.

Some may think that it means stimulus is working, but on the contrary, it means the jobs are being artificially created and propped up, and when the Fed stops pumping money into the economy and/or begins to unwind it's positions, the economic house of cards will collapse around them. Rising interest rates will result in similar consequences. On the other hand, only 14,000 of the jobs added in January were in manufacturing, which would have pointed to a sustainable growth pattern if the numbers were higher. So the economic picture remains grim, and the U.S. economy continues to falter and struggle.

Fed Strategy

For those that don't understand the monetary policy of the Federal Reserve, it is probably thought the latest job-creation numbers point to wild success for the central bank. It's actually the opposite because the overall stated purpose of quantitative easing is failing at this time, which is to debase the U.S. dollar. What that means is the Fed will continue to print money indefinitely, and could even ramp up the printing presses more ... and probably will. The Federal Reserve wants a weaker, not a stronger dollar. We'll get into the why of that a little further into the article.

Fed minutes

Before we go on, there is a need to point out the latest minutes from the Federal Reserve which supposedly pointed to internal disagreement about the loose-money policies it is now engaged in. A large number of investors actually ate this up, thinking the Fed was indecisive over whether or not it was going to continue on with its stimulus program over the long haul. It was undoubtedly a ruse.

The Fed has absolutely no intention of ending quantitative easing any time soon. The comments in the Fed minutes were obviously orchestrated to create a sense of uncertainty around its practices and outlook. The question is why did they want that to be layered on the public investment psyche? This is important because it seems to contradict the goal of debasing the U.S. dollar even further.

I don't think it's anything more than creating some doubt in the minds of those who believed they had the moves of the Fed figured out. Almost no one has been uncertain as to what the Fed would do lately, and so that allows for a number of investors to position themselves for huge gains. That includes other countries as well. So to generate some confusion in the minds of people was the goal there, and it has of course worked, as the idea of an ongoing recovery has been successfully planted in the minds of investors. Now many think sometime soon the Fed could end its stimulus, even though by its own unemployment parameters it's far from its stated goal.

Why the Federal Reserve Failed to Weaken U.S. Dollar

Okay. The Fed failed to lower the value of the U.S. dollar. The reason is that we are in the midst of a currency war, even though it is asserted that isn't the case. And don't be confused by the origin of the war: it's the Federal Reserve and its lengthy loose money policy that kicked it all off. The reason the dollar isn't falling in value is because the central banks of other nations have responded with their own stimulation efforts; the most recent and important being Japan.

Nothing but a currency war, or aggressive response to the policies of the Federal Reserve could have kept the price of the U.S. dollar from falling. The fact that the dollar is perceived to be so strong confirms the fact there is a currency war going on. Nothing else can account for the strength of the dollar at this time. Since it may not be obvious to a lot of readers, I include the practice of people and institutions throwing their money into U.S. dollars when they panic, which seems to be very regular these days.

Weaker competing currencies are creating the illusion of a strong and safe dollar, which is then artificially reinforced by investors pouring their money into it. This is why I tie the currency war and illusion of safety in the U.S. dollar together. They're inseparable, and so must be tied together when talking of currency movements. The perceived flight to safety is a major reason the dollar retains some of the strength it has.

Central Banks and Currency Wars

A currency war is when central banks representing different nations participating in the printing of money out of thin air. This is of course sounds like stimulus in general. The difference between that and a currency war is the degree and response of central banks to the Fed. In this case Japan has boosted its stimulus enormously, and so the yen has moved lower against the dollar.

While we have no idea when it will change, the outcome of all of this for the U.S. dollar is it will probably continue to remain strong for a season, and so the Federal Reserve will continue to print or respond to competing stimulus efforts in order to bring the value of the dollar down. Eventually it will cause investors to lose faith in the dollar, which at that time will experience an enormous plunge in value in a relatively short time (not instantaneously).

All of this is predicated on the fact the Fed wants a weaker U.S. dollar. The only way to get it is to continue printing money. The outcome of that is obvious, and only a matter of when, not if it happens.

Currency Wars are Predictable

What's interesting about currency wars is there are recent historical data which can be used to learn how the currencies respond. While a currency war is cyclical in regard to different currencies, they are linear in nature, which means they are predictable and easily identifiable. Already noted is the predictability of the response of the Federal Reserve to competing central banks in regard to its policy of debasing the dollar.

The next stage is to see which currencies will be affected and how by that battle. Over the last couple of years we can easily see how the battle of currencies played out with the dollar, the euro, and now the yen. This is where gold now comes into the picture. To see the movement of the value of currencies, it must be measured against gold in relationship to a specific currency. In the case of the U.S. dollar, it reached a top in September 2011.

About a year later the same happened in regard to euro gold. Now we have yen gold approaching history highs. The pattern is easy to see, and as mentioned - predictable. The metric is simply the price of gold reflected in the currency in question. So currencies move in a predictable manner as they devalue in relationship to gold.

After the yen the British pound will probably be next in line to move in the same manner. When the cycle comes back to the U.S. dollar, it is at that time the projections of much higher gold and silver prices will kick in.

Understanding Gold Prices and Currencies

Many investors don't have an understanding of what is happening with gold when talking of its price, so let's look quickly at what it really means. When talking about the price of gold and whether the movement is up or down, in reality what is being talked about is the strength or weakness of a currency that is being determined.

Gold itself is inert and actually stays neutral as a store of value. The price of gold moves in direct correlation to the strength or weakness of currencies. Again, this is why major currencies in a currency war can be identified fairly accurately as to their strength in relationship to gold. Just keep in mind it's the currency that is actually being measured against gold, not the value of gold in and of itself that is going up or down on its own.

Gold and Fed Minutes

Let's revisit the Fed minutes again. Why did the Fed have the comments about its policy in them? It wants to keep investors off balance. That is important because it is in order to be able to successfully debase the dollar while attempting to hold down the price of gold and silver, as well as other commodities. If investors believe the dollar remains safe, they'll continue to pour money into it even though it is under attack by the Fed itself. In other words, it's trying to keep inflation in check by making investors believe it may stop stimulating at any time.

That's not even close to the truth, but the idea has now been planted in the minds of investors, so they are paralyzed some in regard to putting money in gold as a place of safety. Some actually believe the Fed minutes point to a possible end to quantitative easing, when in fact there is no such idea in the near-term suggesting the Fed is even contemplating it. Most investors don't understand the consequences of the Fed unwinding its positions, and so take as fact the orchestrated implanting of alleged opposition to ongoing stimulus into the Fed minutes, when the stimulus will continue on for some time to come.

Gold Traded in U.S. Dollars

All of this is to say that the continuing currency wars has helped protect the U.S. dollar from being seen as enormously weak. That has brought the price of gold down against the dollar. That means the dollar against a number of currencies has strengthened, creating the illusion it has strengthened against gold. But it's not gold that moves up and down remember, but the currencies against the gold. This is what currency wars create, and we simply need to watch it unfold and play out, looking for the time when the dollar begins its inevitable decline.

A Word on Silver

Much of what has been said about currencies and gold can be applied to silver, with the obvious exception silver has far more industrial uses and so has dual demand in that regard; both in supply and demand, as well as its being regarded as an investment metal like gold is. Without getting into the specifics of the enormous number of products now needing silver, let it suffice to say the macro-economic situation in the world - including the growing population and emerging markets - guarantees an enormous industrial demand for silver for many years into the future.

Silver demand and consumption has nowhere to go but up

The price of silver will jump up when it is understood and realized it will be difficult - if not impossible - to meet the demand for the white metal. As far as the price goes, I'm not going to enter that game as far as predicting one. The reason I say that is we are without a historical road map when contemplating and researching silver shortages; there has never been a shortage. We do know when the Hunt brothers tried to corner the market years ago, the price of silver shot up exponentially.

The reason silver is having difficulty pushing up in price is because the silver shorts at this time that are depressing the price. That can't and won't last, although it's impossible to know when that will stop. One thing to consider is there are no supports in place for silver as there are with gold, so when silver shortages are recognized as the reality and the price of silver shoots up, there will be some silver shorts who won't be able to get out that will be crushed.

It will happen. For silver prices, it's more important to look at an inevitable shortage than it is to look at inflation and the fear factor as those looking at gold must do. They come into play with silver, but the real impetus for soaring silver prices will be its inability to meet growing industrial demand rather than its relationship to its investment side.

That's not to say the price of silver couldn't or won't go up based upon its being an alternative to the U.S. dollar, because it will. It simply means the big move in the price of silver will be as a result of shortages, not because of the money supply and inflation. Since silver will move up on both, a growing number of investors believe it could be the most significant asset class of the next decade. I tend to believe they're right.

Silver Investing Strategy

To me, silver shouldn't be invested in using borrowed funds, but rather should be invested in as capital becomes available. That's because there will be a time when the shorts get hammered, and we don't want to be in that position when it happens. Silver shortages ensure that it will happen. We should be positioned accordingly.

Conclusion

The reason for the downward pressure on the price of gold is the ongoing currency wars. The U.S. dollar is still very flawed, but because of the stimulus associated with major currencies it gives the impression of strength because other currencies are also being debased by the respective central banks in each country. The goal of the Federal Reserve is to debase the U.S. dollar. It won't stop until it has accomplished that goal, and there is no way there is any chance whatsoever the Fed is really considering ending stimulus any time in the near future.

Even so, the resiliency of gold is seen by the fact it is still holding its own fairly well in a very difficult environment. Gold will catch up with the money policies of nations as people increasingly grow wary concerning the viability of paper, fiat currencies. That and the pattern of cyclical, but linear currency debasement against gold as a consequence of the current wars means the price of gold will rebound once the effects of debasement comes around again to land on the U.S. dollar.

As for silver, it will be affected by the same forces, although its major move up will be in response to the shortages that are coming and the resultant spike in prices in conjunction with soaring demand. What if you believe there is a recovery? Sorry to hear that. But if you do, be aware that it is at best tenuous and very slow. It won't affect Federal Reserve policy or the currency wars, so everything mentioned in the article will still hold for some time.

The Fed will continue to stimulate, the dollar will continue to fall in value, and the price of gold and silver will rise in response to that.

Commodities Plunge on Concerns of Demand, Fed Comments, and Hedge Fund Rumors

Several elements on Wednesday fueled a plunge in prices of many commodities, as the perfect storm of information resulted in big sell offs.

Among the major concerns was the release of the minutes from the latest meeting of the U.S. Federal Reserve, which hinted at the possibility of it slowing down its latest QE or stimulus program before the hiring numbers it was targeting are even close to being met.

It sounds like a deliberate attempt by the Fed to influence the market, as the chances of it stopping its stimulus any time soon is very unlikely at best. Hiring really hasn't moved at all since the introduction of the latest round of QE, so the idea the central bank is going to just slow down or close up shop is pretty ludicrous.

Nonetheless, a somewhat spooked market over responded by punishing commodities across the board. Gold and silver were hit particularly hard by the news, with gold settling down 2.6 percent and silver 2.7 percent. That brought gold to 7-month lows, while silver experienced its sharpest decline in 2 months.

The other ambiguous news was a rumor a commodity hedge fund had to liquidate positions in oil and metals, putting more downward pressure on commodities. As of this writing there is no proof this has even happened. Most of the sell-off in commodities happened between 10 am and 11 am, the time the rumor of the hedge fund sell off was at its peak.

Some analysts look at it all as speculative trading more than anything else. The fact that the majority of the commodities fell on average about 2 percent points to a blip more than a rush out of the sector.

Finally, what has some potential legs one way or the other for commodities is the demand factor, in that regard there continues to be mixed data and outlook concerning the growth rate of the U.S. and global economy, causing ongoing uncertainty in the commodity markets

There is no doubt though that this was a news-related downward push on commodity prices, and shouldn't continue on until there is more clarity over the issues, which outside of the rumored hedge fund, will take time to reveal itself.

Commodity demand and the presumptions the Fed may end easing sometime soon, are things that won't be known for some time, with the ending of stimulus assuredly not going to happen any time soon. Once that's realized, things will level off again until commodity demand is better understood.

Mohr Sees Strong Commodity Growth, Weaker Gold

In the near term Scotiabank’s commodity market specialist, Patricia Mohr, sees commodities in general doing very well, with gold going through a consolidation period, moving up to $1,725 an ounce in 2013.

Over the longer haul, Mohr sees commodities to continue rising based upon growth in emerging markets. Of particular note for Mohr is the potential growth of automobile ownership in Asia, specifically in China, where only about 80 in 1,000 people own vehicles at this time.

She also like fertilizer companies because of farmers holding back on buying fertilizers recently. With food prices higher and margins widening, farmers should have a positive outlook going forward, which should result in higher demand for potash especially.

Another area that looks promising is uranium, which should enjoy strong growth as demand continues to rise, even though the media reports only part of the story. While there have in fact been some cutbacks in production in some countries for political expediency, they simply make it up by importing uranium for other countries, allowing the illusory policies to stay in place, distorting the fact that uranium demand will continue to grow.

Also of note with uranium is the program instituted by the U.S. and Russia dubbed Megatonnes to Megawatts. That will result in close to 24 million pounds of U308 no longer in the market, affecting supply.

Mohr sees uranium climbing to as high as $65 a pound by the middle of the decade, up from the $40s range it has been in lately.

As for copper, that is seen by Mohr as slowly dropping from the $3.50 she sees in 2013, to about $3 a pound over the longer term. Increased mine capacity is her reasoning there.

Gold's Safe Haven Status Back in Play

In the short term the market knew that if Mitt Romney had been elected president the price of gold and silver would probably have went through a temporary drop, based on the actions of what a President Romney would have done.

On the other hand, the market also factored in a win by Barack Obama would be good for gold and silver, with expectations being Obama would continue to implement the same failed policies he did the first four years of his Presidency.

That has born out well so far, as the price of gold continues to rise immediately after the election, although there are other factors coming in to play.

The most significant is the safe haven play, which has grown as the presidential race played out.

No matter what is done going forward, there is little desire in Washington for politicians to take the needed steps to deal with the economic disaster and the policies that have been behind the cause of it, including an unfettered Federal Reserve that sees only printing more money as the answer to economic weakness.

This is happening in light of a stronger U.S. dollar, which suggests investors understand it's a faux strength, and not one that is inherent to the currency. The only reason it still is perceived by some as a safe place to park their money is that other major economies also have had their central banks throw money at the problem as well, resulting in the currencies moving down in value together, giving the impression of things going on as usual.

But the move in gold price confirms that a growing number of investors know that this is the case, and gold will continue to rise in response to that reality over time.

Continually in the background is also the ongoing sovereign debt crisis and Europe and the march of the region into recession; which is ensured now.

All of this would be enough to push gold and silver prices up, but we haven't even seen significant, official inflation yet, and once that kicks in, all bets are off as to how high the price of gold and silver will go. It's only a matter of when, not if that happens.

Finally, China and other Asian countries appear to be buying up a lot of gold, offering price support to the precious metal, and over time, if China is bolstering its gold supply for the purposes of acquiring other commodities in the future, this will add even more strength to gold, driving up the price even further.

The VIX, which measures the fear factor, has also been rising recently, confirming there is more fear in the market than there has been, providing more incentive to place capital in gold.

Leeb Sees China Implementing Gold Standard

In what would be an extraordinary event if it happens, Stephen Leeb said he believes China is working towards implementing a gold standard to back up the renminbi or yuan.

Leeb said this in an interview with King World News, "China wants gold so they can continue with their plans. They want their currency backed up in gold and they are going to continue to buy it. So gold may weaken, but if it does people should buy it. Once gold starts taking out the all-important $1,800 level, you are not going to have a chance to get into the market. It will not let you in."

As to whether or not China goes on a gold standard or not really won't have an impact on the price of gold, as it'll go up whether China does or not, as the country will continue to buy as part of its economic and financial strategy.

I don't mean by that a gold standard wouldn't boost the price of gold, just that China will buy up gold with or without a gold standard, and that's one element concerning the price of gold that a lot of investors and the media aren't talking a lot about.

Most are focusing on how the money created out of thin air by major central banks around the world will impact gold prices, and silver as well; which is of course of major importance too.

According to Leeb, China has boosted its acquisition of gold by three-fold over the last year, and it doesn't appear to have had any effect on the market at this time. Sometime it will, as news gets out about the demand factor of gold in that regard.

Assumptions are China is bolstering its gold reserves in order to use it to acquire much needed commodities over the years ahead.

Some wrongly believe that China has reached some type of peak concerning building the infrastructure of the country, but it's really only taking a breather, and most likely we'll see them reallocate assets to building out its infrastructure rather than creating cities with few people residing in them.

Leeb gave this advice concerning investing in gold: “My advice is if we get a dip in gold, I would buy that dip.  Gold has a lot of support.  I think long-term and that’s a bet that I’m always willing to make.  I haven’t sold a single ounce of gold or a single share of a gold stock.  That is because I am positioning and I am thinking about the long-term."

Interestingly, we haven't really seen much in the way of "official" inflation at this time. Once that kicks in, along with stimulus and Asian demand, gold will rise to unprecedented levels.

Silver is one of the few assets he sees will come close to rivaling gold going forward. He didn't mention much about demand and it being an alternative to many investors who are being priced out of the gold market, as he commented on the possibility of governments stepping in and not allowing people to buy it any more.

“Having said all of this, if there is one investment that can possibly rival gold, it’s silver.  People don’t realize this, but at some point governments may say to their people, ‘We need the silver and you have to stop buying it.’  When that point comes, silver is likely to be at $150 to $200.  So there is still a lot of room in the silver market.”

Other than China and other Asian markets acquiring gold, the reasons gold will go up are the same reasons silver will, and silver has a much larger demand from the industrial sector versus gold, but is considered secondary as a form or protection and an alternative currency than gold is.

A number of commodity investors see silver outperforming gold over the next decade, but I think that will depend largely upon how much demand Asia has.

Gold, Silver Purchases on the Rise

According to Bill Haynes, president of CMI Gold & Silver, there has been some major acquisitions of gold and silver by new money over the last month, with much of that coming from the fall in price on Friday, November 2.

From now on, for the most part, any pull back will be considered a buying opportunity for gold and silver, as it won't matter what type of short-term economic data brings to the table, such as the slightly positive news on unemployment Friday that temporarily drove down gold and silver prices.

The good news is even though many of the recent investors are new at the game, they have enough knowledge to know to wait for dips to buy. If it were the general population buying, it would be more disconcerting, as it would suggest we would have to start looking for some bubble conditions going forward. We're not near that level yet, and the price of silver have some way to go before the average investor starts to throw their money at the asset class, which by the time they get in will be far above today's prices.

The reason why it doesn't matter concerning the anemic economic news that is being spun as positive movement forward, is it's all about the sovereign debt problems the major economic nations face, and the refusal of government to put meaningful and honest austerity measures in place to combat the out of control spending of governments.

That means of course that stimulus spending will continue to rise exponentially, and the price of silver and gold will move up with it, as people and institutions look for safe places to put their money and to battle rising inflation.

While silver should outproduce gold over the next decade, one major situation in Asia could cause gold to jump higher than expected in the short term, which is a reference to the low gold reserves held in the general region.

Greece Poised to Vote on Austerity Measure

Even though the coalition government of Greece can't reach a consensus on required austerity measures from international lenders, putting off the vote for another week, there is no doubt a vote will soon come, as it is expected that some time next week draft legislation will be submitted for a vote.

Finance Minister Yannis Stournaras addressed reporters saying "All of the (draft legislation) will be submitted next week. I think there is no other way to do it."

The main battle among the coalition is between the conservative majority and the leftist representatives.

Greece won't receive any more loans unless an austerity package is passed by its parliament.

The much needed labor reforms associated with the austerity measures are being opposed by the leftist, who say they will vote against the package if they aren't thrown out.

Greece Prime Minister Antonis Samaras said this concerning the chaos he sees as following in there is no agreement in place, "The problem is not whether we (introduce) this measure or that measure. On the contrary: It is what we would do if no agreement is reached and the country is led into chaos."

As usual, the selfish Greek unions are lining up to protest the implementation of another set of austerity measures, being unwilling to make concessions that will be economically forced upon them whether they like it or not.

I'm not primarily talking about politically here, but the market itself will force the moves, as the economic practices of Greece, along with other socialist-influenced countries are unsustainable, and a more robust capitalist system (not crony capitalism) must be released through the governments and unions getting out of way and allowing economic liberty to come forward.

It is likely this is the last chance for Greece, no matter which way the vote goes, which will surely be to submit to the austerity measures required by the international lending community.

More importantly, Greece hasn't been forthright with its promises in the past, and even if they get aid this time around, it would be surprising if it ever happens again if they renege on it and continue on with their reckless spending and lifestyles at the expense of Germany, and to a lesser extent, other euro zone members.

Leftist and socialist political parties in Greece continue to act as if they can do what they want and still have access to international funds. Worse, they are still in denial of the fact the promises they have made and the concessions one have never been sustainable, and now the inherent weakness and failure of all socialist economic ideology and policies are again being revealed as unworkable. That's what this is really all about, and nothing can change the realities, no matter what is asserted or fought over.

The money has run out, and the lifestyles lived by Greeks and others looking to the government as their healer and provider, are finding out to their dismay that socialism and Keynesianism doesn't and can't work over the long term.

That is the reality facing all of Europe and America as well. And the sooner it is dealt with, the quicker the pain will pass and economic health will be the result. But since no one is really addressing the issue, even with a nod towards some austerity (it's a deeply ingrained mindset that is the real problem), in the end, until people change their attitudes towards being "owed" something by government and the productive people in the nations of the world, nothing will change.

Austerity will be voted in by the government of Greece. It's a major question as to whether this time around the austerity measures will be adhered to. Either way, this is just a temporary respite, and inevitably Greece will go bankrupt, with other countries following in its footsteps.

Just like the failed USSR, which capitulated to the inability to implement communism and socialism, all other efforts to do so are also doomed to failure.

It doesn't work, and neither does crony capitalism or fascist government agreements and going to bed with businesses.

The free market is the only answer, and while it'll take decades to do so, it will emerge out of the ashes of government interference, fascism, socialism, and any other attempt to deal with economics and people.

Only people taking voluntary actions to interact with the businesses and people they choose to will cause an economy to survive and thrive - whether local, regional or national - and there will be no answer until that becomes the practice of people around the world.

The other major factor is the abandonment of government as the looked-for entity which is to heal and provide for people, which has led to debt that is impossible to pay off. The U.S. alone has unfunded liabilities of over $220 trillion. Yes the trillion is the correct figure. There is no way that will ever be paid off. A default is coming for the American government, and it's only a matter of what type of default, not if there will be a default.

There is no doubt a number of commodities will benefit from the ongoing debasement of currencies in major economic countries, and over time gold and silver will continue to rise in price, as investors realize the U.S. dollar and most other currencies are extraordinarily flawed.

Some gold and silver miners are set to soar, as are the price of silver and gold, which many will make a lot of money off of in the futures' market, with silver looked upon by many as being the probable best investment over the next decade.

In the end, there continues to be no real political will to tackle the spending and debt problem coming from out of control government, and until the economic conditions force governments to shrink and be much more limited and contracted to what their real purpose is, everything will continue to get worse.

Investors need to be aware of that, and make decisions accordingly.

Unemployment in Spain Surpasses 25 Percent - ECB Awaits

The economic news for Spain continues to worsen, as the National Statistics Institute said in Madrid that the unemployment rates has soared past 25 percent, to stand at 25.02 percent. That's up from 24.6 percent in the last quarter.

Projections are the economy of Spain will continue to sputter, with unemployment probably reaching 27 percent in 2014.

Painting a much rosier picture is the Prime Minister Mariano Rajoy, who sees the employment picture improving in 2013, and the Spanish government saying the economy will drop by only 0.5 percent. Economists watching the situation see it contracting by almost 1.5 percent.

This puts even more pressure on Rajoy to apply for the loan aid offered by the ECB, although he asserts he feels no pressure to do so at this time.

According to an analyst with Madrid-based consultant firm Analistas Financieros Internacionales, Sara Balina, she told Bloomberg that the third-quarter wasn't nearly as good as the data suggest, as "they were distorted by a temporary increase in demand before a value- added tax increase and by exports that may suffer from weakening growth in the euro zone.”

Although positioning for time, it's clearly approaching when Spain will have to apply for financial aid, which it is delaying in having to do because of the austerity measures included in the package.

The only question is how far and how long will the politicians in Spain go and wait until they finally do what everyone knows they'll have to do: apply for the aid.

This will result in the price of commodities, especially gold and silver, rising significantly, which along with QE3 from the Federal Reserve in America, will push the price of the precious metals up.

Silver, Gold Await Printing Presses

While there is no doubt the Federal Reserve and other central banks around the world will continue to ramp up the money printing presses, we remain somewhat in a holding pattern, at least in the United States, after Ben Bernanke announced the Fed will buy $40 billion in mortgage-backed securities on a monthly basis indefinitely, with indefinitely measured by the health of the job market, with hints the Fed and Bernanke want to see it at about 5.5 percent.

Even though some business and economic writers and investors have attempted to paint gold and silver has having reached a plateau at this time, with the probability they will fall in price, there is not doubt nothing will stop central banks from feeding the out of control spending habits of governments around the world, and the price of gold and silver will continue to rise over the next 10 years, with gold and silver miners, which currently, for the most part, are enjoying low valuations, will bring investors solid returns, especially for silver investors, where the gold-silver ratio continues to be far higher than historical levels, standing far beyond the usual 16 times ounces of silver it takes to buy an ounce of gold, to weigh in at a hefty 54 times the usual amount it takes to buy an ounce of gold with silver.

That alone will dramatically push up the price of silver, as its historical ratio to gold should have it stand at over $100 an ounce as of this writing.

So in the short term, in spite of the announcements by the Federal Reserve and the ECB to stimulate the respective economies of the United States and the euro zone, they still haven't launched their buying programs, which has temporarily kept the price of silver and gold in holding patterns.

It's apparent in the case of Bernanke that he's waiting to implement QE3 when it is seen as not an attempt to influence the upcoming presidential election. With that soon to end, it won't be much long afterwards when it'll begin, and then silver and gold will jump, and it could even before that as investors begin to price in the effect of the stimulus on precious metals, and the resultant fall in value of the U.S. dollar.

For the European Union, what is causing the holdup there is the temporary decision by Spain to attempt to make it appear they have a chance of not needing the money to bailout its economy. That's a fallacy, and largely based upon the need to make it look like they're fighting to keep their people from having to face forced austerity in order to secure the loans.

But like Germany, it will cave on the borrowing end, just like the German leaders do on the lending end. Spain will accept the loans, and when they do, that will also cause silver and gold to rise in price.

One uncertainty in regard to currencies is the major competitors are all debasing their currencies through stimulus programs of one type or another, so it's unclear whether there will be much in the way of the impact of the fall in the U.S. dollar on gold and silver. In that regard inflation and safety will be the impetus behind the rise in the two precious metals; much more so probably than the weakening of the U.S. dollar. Again, it depends on how the market reacts to and views the impact of QE3 in the U.S., and if it deems it as more dramatically weakening the U.S. dollar against major competing currencies, we could see it push up the price of silver and gold even quicker and further than most think.

Another short-term consideration is the selling off of assets by those making decisions based upon tax strategies. That could push down silver and gold some as investors sell off at foolishly low prices. But there is no doubt the duo will continue to rise, even in the short term, as you simply can't bet against the practices of the Federal Reserve and other central banks, which have placed a floor under the precious metals, and which will soar up from there for years to come.

It's a matter of how to invest in silver and gold, not whether you should.

Finally, it is believed that QE3 could even expand beyond the $40 billion spent monthly as Operation Twist comes to an end. The thought is Bernanke will probably start to buy treasuries again in an attempt to jump start the economy, even though that has repeatedly failed to achieve results.

Gold and silver miners, because of ridiculously low valuations will soar in price as an asset class, with some doing far better than others of course. But the rising price of silver and gold, and the relatively new focus on dividends will be a powerful attractant to investors, who will be able to cash in on both fronts if they invest in the right companies.

Another element to watch is mergers and acquisitions among miners, which will make a lot of money for those that can anticipate where those moves are likely to be.

Of course in the end, gold and silver are first a place of safety and hedge against inflation, so that is the number one priority for those putting money in the precious metals. But with little in the way of growth in equities, they will increasingly be looked at by general investors as places they can also make money over time. That will also push up the price of miners, which will benefit everyone holding positions in them.

The silly talk of a gold or silver bubble is off the table at this time, as the everyday investor has yet to really enter the market in a significant way, and until that happens en masse, there is little we need to be concerned about concerning a bubble.

We will need to watch it closely, but we have yet to see the outrageous bidding up of gold and silver prices, and even when that does happen, which shouldn't be for a while, it can sometimes take several years before the prices stop climbing.

For now, investors way for the printing presses to start up, and when they do, there is nothing in the way to keep the price of gold and silver from jumping in the short- and long-term.

How Far Can Gold Prices Rise? $5,000? More?

We are living in extraordinary times in relationship to the price of gold and its correlation to the quantitative easing programs put into play by major economic global players around the world.

So while the idea of gold soaring to price of $5,000, and possibly even to $10,000, while seemingly outrageous for the uninitiated, could in fact become a reality, dependent upon how economies respond to previously failed stimulus measures, and how those nations deal with the growing amount of debt incurred as a result of creating money out of thin air.

A couple of major factors are the debasement of currencies and how high inflation will rise.

Gold prices will largely move on those two factors, especially when the U.S. dollar and other currencies fall in value and are no longer perceived to be places to safely park one's capital.

The major problem with predicting the price of any asset is usually those who understand where things really are, tend to get overly excitable and project prices reaching certain levels dates which are too short in duration. Afterwards, most investors don't believe the probable numbers because of the many failed short-term predictions. But that doesn't mean the underlying assumptions are false, just that the people making the predictions usually are doing so to garner attention to themselves.

That aside, gold will continue to be in a bull market for some time to come, and bubble status hasn't come close to reaching proportions which could actually be identified as such in any meaningful way. The price of gold,, in other words, isn't close to reaching the top yet, and nowhere near enough casual investors have entered into the gold fray yet to allow speculative investing to push the gold prices up. As a matter of fact, we're not even close to that to use the term "bubble" in relationship to gold prices. It will happen someday of course, but is likely to be years away, as well as a much higher price away.

Even those with a much more conservative bent see gold climbing to $2,000 over the next 12 months or so, and possibly as soon as a few months from now, which could be around the early part of 2013.

With the direct connection between the price of gold and creation of money out of thin air, the current practices of open-ended stimulus by the Federal Reserve - the central bank of America - and the lack of effect on helping the economy, all that's really happening is a growing debt load and rising inflation, with nothing positive in return. That is a extraordinarily positive environment for gold, and as well for silver, and both will benefit over the next decade or so, and possibly much longer, depending on the actions of governments and central banks during that time.

The only reason the U.S. dollar hasn't appeared to totally collapse, is other major economic players and their central banks have taken the same actions, which masks the fall in value of the U.S. dollar, because their currencies are also falling. It's more accurate to measure any currency and its value against gold than other currencies, as they're generally simply moving in lock-step with one another because of similar actions taken by central banks, which negates the fall in value of the U.S. dollar.

All of this is to say there is no political desire or will to stop the creation of funny money, and until and if that happens, or is forced to happen, there is absolutely nothing to keep the price of gold to continue on to new heights.

In the end, we're in totally uncharted territory as far as the amount of money being printed, national debt, and amazingly high unfunded liabilities. In the United States alone unfunded liabilities are over $220 trillion (that's not a typo).

But even with these unprecedented numbers, the underlying elements that push the price of gold up are still in place, and because they're increasing in number, as far as money creation goes, and it's only a matter of time before inflation of major proportions set in, gold prices will continue on their upward trajectory, and while it's impossible to know how high it'll go and how long it will take, we're going to continue to see an amazing story unfold concerning gold, and those riding the trend will continue to see their wealth grow with it.

At this time there is no reason to fear a gold bubble, as it's unlikely we're even in the early stages of one. But there will be a time when it arrives, yet even then history has proven the price of gold can soar for some time before it settles back down to earth. We're not close to being there yet, although there will continue to be corrections, which for now must be considered buying opportunities.

So will gold reach $5,000 or even $10,000. It's totally possible, although there is no way to put a time frame on it. All of this will be determined by central bank actions and government policies. Look to Europe to note that governments have little will to implement austerity policies, even though they must if they are to survive. Each government continues to attempt to kick the can down the road and hope it doesn't stop on their watch. One day it will, and gold and those investing in it will wildly benefit from it; even more so than they have in the past in all likelihood.

We are in uncharted territory will central bank money printing and government debt and obligations around the world, that means the price of gold is also in uncharted territory, and all we can do is follow the actions and trust what we know to be the consequences of the practices of these two entities. Nothing will change gold price movements as they relate to the actions of governments and central banks, and how it has responded in the past will continue to be the same in the future until there is in fact a real gold bubble. We're not there yet.

Gold Will Outperform Dow Says Parets

Those who understand currencies and their responses to stimulus measures by central banks, know that it devalues them, as the Federal Reserve has done from its inception in the United States, whereby the U.S. dollar has plummeted over 95 percent in value since 1913.

Inflation is another major factor, which always follows stimulus measures, or as it's called today: quantitative easing.

While those who invest in precious metals like gold and silver know they are the place to be when central banks go crazy with money printing, there is another metric to check for those that may not understand the relationship between gold and the increase of the money supply. And that is the Dow-Gold Ratio, which measures how much it costs gold to buy one share of the Dow.

According to Eagle Bay Capital hedge fund manager J.C. Parets, it is the right time to rediscover this metric, citing the strength of the data since 1999, when the gold bull run began.

At that time it took 44 ounces of gold to acquire 1 share of the Dow Jones Industrial Average. Parets says that in 1980, one ounce of gold would buy 1 share of the DJIA. So from 1980 to 1999, it went from a ration of 1-to-1 to 44.

In 2011 the ration was 6, and at the time of this writing it has risen to 8.

Since 1:1 has been the historic low of the metric, Parets said there is a long way from 8:1 to that low, and believing gold will undoubtedly outperform the Dow, he sees gold to still be a good investment even beyond the obvious impacts of the effect from overstimulating the economy and the resultant price movement of gold.

This is simply another piece of data to use in our arsenal to measure the price movements and probabilities of gold.

Gold in Largest Two-Day Drop Since August

For the second day in a row Gold prices fell on Monday, resulting in the biggest two-day drop since August.

The strange idea that a bunch of seasonal, part-time hiring in the latest jobs report, which may have pushed the unemployment rate down to a still hefty 7.8 percent, made some investors feel it will pressure the price of gold down because of a possible stronger economic recovery.

It's ludicrous of course, as not long after the end of December the temporary, part-time workers will be let go, and the unemployment numbers will shoot back up, if not before then.

After falling against the euro to a two-week low, the U.S. dollar finally managed to pull itself up, as some believe a stronger recovery than expected, which would push up the price of the U.S. dollar if it were true.

It isn't of course, but that's the faulty assumption being reported in the press; more than likely in hopes of attempting to make Obama look like he's doing better than he really is with the economy.

With weak earnings expected, it's hard to point to anything really positive about the U.S. economy, other than the probability the housing market may have bottomed out. In that case, even if it hasn't bottomed out, it is probably close to it, although that will have very little impact in the near term on the economy either way.

As long as Ben Bernanke and the Federal Reserve continue to create money out of thin air by acquiring $40 billion a month in mortgage-backed securities, the price of gold and silver, along with other hard assets, will continue to go up over time.

It's likely the Fed won't stop stimulating until unemployment drops below six percent, with some hint from some members of the Fed that it may not stop until it reaches 5.5 percent.

The December contract for gold futures in the U.S. settled at $1,775.70 an ounce, down $5.10, or 0.3 percent. It's up by over 13 percent in 2012 so far, the 12th year in a row it'll finish in positive territory.

For silver, it closed at $33.98 an ounce, down 1.4 percent. It has also dropped significantly over the last couple of days, down over 3 percent during that period.

Platinum closed at $1,689 an ounce, falling 0.9 percent. Palladium ended at $653.47 an ounce, a decline of 0.5 percent.

Silver Now Outperforming Gold

Over the last three months, the price of silver has jumped about 25 percent, while during that same period of time, gold has performed at about half that level.

Most commodities experts have been saying that silver is highly likely to outperform gold over the next decade, as the price of gold has soared so high in the previous decade that it'll be hard to duplicate that going forward, even as more industrial demand for silver continues to grow even as silver supply is tightening.

Add to that the new practice by the Federal Reserve and ECB of initiating open-ended stimulus programs, and you have support under both metals, with silver poised to break out even more once the sellers complete their current disposal of silver assets, which has pushed the price of silver and related companies and ETFs down.

Some rightly point out that economies important to silver demand have been slowing down, with the most significant being China, but that will change if that continues to go beyond the attempts by Chinese leaders to cool off their economy, which they've been doing for some time now.

There is no doubt the Chinese will stimulate if that becomes the case, and silver demand will continue to rise, even if there is a temporary lull.

The world is now in stimulus mode, and it doesn't matter whether the demand for silver is based primarily on that reality. What's the difference if silver prices move up because of stimulus or industrial demand that is organic in nature? Either way, silver demand will rise, even though over the long term the question of sustainability rises.

But we're talking years there, not months, and so silver prices should continue to rise over time, even though, as usual, it will have a more bumpy ride than gold.

Finally, the underlying assumption and assertion by the Federal Reserve is it stands ready to stimulate even more if the jobs market doesn't improve. If that were to happen, it would assuredly give the price of silver another big boost.

Again, most of this is only a matter of when, not if. In the short term, China and Europe may weigh on the price of silver some, but once Spain caves and requests stimulus, that should change quickly, and with most investors understanding China has deliberately slowed their economy down, it won't be much of an impact on silver prices, as there are really no surprises there except for those that don't do their homework.

Silver has become a long-term investment option, and one that should be invested in that way. There is no doubt whatsoever that it will be among the strongest performing assets in the next decade, based upon industrial demand alone. Include the long-term stimulus strategy of the U.S. and Europe, and you see how that will be the case.

Silver Could Hit $100 Says Citigroup (C) Analyst

Citigroup (NYSE: C) analyst Tom Fitzpatrick said in an interview with King World News that the price of silver could jump to around $100 an ounce if gold prices continue to soar and people turn to silver as an alternative to higher-priced gold.

Fitzpatrick said this:

When we get a weekly close through both of those critical levels ($1,791 for gold and $37.48 for silver), we anticipate that will give us an acceleration which will take us up toward the targets on gold to the $2,055 area, and silver back to the old highs near $50. However, on a longer-term basis we believe we have a setup here which suggests that gold could continue to go higher for some time to come.

We’ve always been of the view, and are still of the view that gold is first and foremost a hard currency more so than it is a commodity. So the building blocks are there for gold to continue to go higher, not just against the dollar but against all of the other paper currencies as well.

Given the dynamics that we have in the background, the similarities that we to the 70s, we would argue the combination of the similarities, and the major difference which is the money printing being exercised by all of the developed world’s central banks, we can see gold continue to follow a trend equal in magnitude to what we saw in the 70s.

Fitzpatrick sees a direct correlation between the price move of gold and the response of silver investors to that.

If we see gold move to the $3,400 level, it is not inconceivable that we may see silver closer to $100. Investors have to remember that at the end of the 70s the gold price doubled in a mere five or six weeks. If 3 to 5 years down the line we see that the base policy of the developed world is to continue printing money, then the gloves are off in terms of what levels gold and silver could actually go to.

It's highly probably that central banks around the world will continue to print money for years because they continue to hold to the flawed Keynesian view.

That's also sure to happen because corrupt politicians refuse to take the needed austerity measures to rein in out of control spending. They will continue to kick the can down the road until the global economy blows up in their faces.

With that as a backdrop, every investor should have a portion of their assets in gold and silver at minimum, and keep an eye on other commodities which will benefit from the endless printing of money.

Outside of silver and gold, investors should look at commodities that are trading at lower levels in comparison to their peers.

Commodity Prices and QE3

Debate is raging over whether another round of quantitative easing will in fact help boost the price of commodities.

Bears look at it from the point of view of demand alone, while bulls look at it from a more holistic view.

While demand is obviously a major factor in commodity prices, the U.S. dollar is just as important, and also can determine the demand because commodities are bought with U.S. dollars being used as the medium of exchange.

So if the U.S. dollar is strong, the demand for commodities can go down because of the high cost of acquiring them. That is what has been happening as it has strengthened against a number of currencies as the sovereign debt crisis in Europe continues to push down the price of competitive currencies.

If the Federal Reserve eases, that is sure to put downward pressure on the dollar and commodity prices in general will start to rise again.

There are other factors involved, but the strength of the U.S. dollar is among the top elements that impact most commodities.

Gold and silver will especially respond strongly if there is more easing, as they are also considered alternative currencies or safety against inflation, along with many industrial uses in regard to silver.

Over the short term it's any one's guess as to the price movement of commodities, but over the long haul there is no doubt commodities will, for the most part, continue on their upward price run.

Some commodities, for example grains, are already outside the impact of whether or not more easing will come, as other factors like the ongoing drought in America, and now parts of Europe and Australia, are aiding in pushing grain prices like corn and soybeans to record highs.

Barrick (ABX) (GFI) (GG) (NEM) Close Up Even as Gold Settles Slightly Down

Shares of Barrick Gold (NYSE:ABX), Gold Fields (NYSE:GFI), Goldcorp (NYSE:GG) and Newmont Mining all closed up on Thursday, even as gold prices traded slightly down.

Gold for June delivery declined $3.90, or 0.3 percent, to $1,522.80 an ounce.

Gold for August delivery was down $4.10, or 0.3 percent, to $1,523.70 an ounce in the Comex division of the New York Mercantile Exchange.

July silver fell 31 cents to settle at $37.33 an ounce, lower by 0.8 percent.

Trading was light as we approach Memorial Day weekend in the United States.

The U.S. dollar was weaker, as was economic data, but it wasn't enough to push up the price of gold, while other metals traded mixed.

First-time jobless claims were up again last week, jumping 10,000 remain above the 400,000 mark.

Barrick Gold closed at $47.12, rising $0.31 or 0.7 percent. Gold Fields ended at $16.10, up $0.27 or 1.7 percent, to . Goldcorp closed at $49.76, gaining $0.22 or 0.4 percent. Newmont Mining ended the session at $55.61, jumping $0.40 or 0.7 percent.

iShares Silver Trust (SLV) Pulls Back as Silver Drops

Shares of iShares Silver Trust (SLV) dropped after a couple of days of robust increases in silver prices of about 3 percent during that time.

July silver was down 31 cents to settle at $37.33 an ounce, a 0.8 percent plunge.

Gold futures were also down a little Thursday, even in the midst of the falling value of the U.S. dollar and weak economic news.

Gold for June delivery fell $3.90, or 0.3 percent, to $1,522.80 an ounce.

Gold for August delivery dropped $4.10, or 0.3 percent, to $1,523.70 an ounce in the Comex division of the New York Mercantile Exchange.

iShares Silver Trust closed the day at $36.51, falling $0.41, or 1.11 percent. Volume was relatively light in comparison to its daily 3-month average.

Gold Prices Soar Past $1,400 Today

Gold prices today moved above $1,400 an ounce, soaring past $1,402, a gain of $8.40 for spot gold.

Even though the U.S. dollar strengthened some today, that hasn't stopped the price of gold from rising, as it has performed that way contrary to the usual inverse relationship between the two, simply because the reasons for the support of rising gold prices overwhelm all other factors at times.

The implementation of another round of printing money will further weaken the U.S. dollar, but at the same time push investors toward investing in gold even more in order to protect against inflation and the loss in value of their capital.

The Federal Reserve's decision to throw another $600 billion into the economy in an attempt to boost the economy will backfire, as the former quantitative easing effort did.

But Ben Bernanke seemingly doesn't care, as there's little else he can do, and evidently doesn't believe in simply sitting still and allowing the market to cleanse and take care of itself.

Gold and gold mining companies, along with other commodities, will continue to rise as a result, and that is good for those investing in raw materials in the months ahead.