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.

Nothing to Hold Gold Prices Back Now

Based upon the assertion by Ben Bernanke that the Federal Reserve is tying its QE3 program into the performance of the job market stimulus could be ongoing for the next five to six years.

with that in mind, along with the decision to keep interest rates artificially low, gold prices should continue to push up for years into the future.

The expectations are that the Fed will continue to ease until unemployment reaches about 5.5 percent. That would result in the Fed balance sheet doubling again, assuming that figure can be met over the next five years or so. If not, the sky is the limit as to how high the balance sheet would go, which will continue to devastate the U.S. dollar, and push up the price of many commodities, including gold.

As measured by the prior experience of the price of gold moving up in conjunction with the size of the monetary base in the U.S., gold prices could soar to the $3,500 to $4,000 range before it's all through. Again, that assumes the job market improves and the Federal Reserve stops printing or digitizing money out of thin air.

Silver Standard Resources Nasdaq:SSRI), Minefinders (AMEX:MFN), Silvercorp (NYSE:SVM) Soar on Fed's QE2

Silver Standard Resources Inc. Nasdaq:SSRI), Minefinders Corp. Ltd. (AMEX:MFN), Silvercorp Metals Inc. (NYSE: SVM) all soared Thursday on the implemention of QE2 by the Federal Reserve which will inflate the economy going forward, which pushed up the broader commodity market, along with individual companies within each sector, including silver miners.

The majority commodity prices increased, including silver, which rose to over $26 an ounce. Gold prices rose to all-time records again, closing in on the $1,400 an ounce mark, while aluminum increased to its highest levels since April.

Silver Standard closed at $25.95 Thursday, rising $1.81, or 7.50 percent. Minefinders surged to close at $9.32, gaining $0.57, or 6.51 percent. Silvercorp was up $11.57 at the end of the day, increasing by $1.55, or 15.47 percent.

Cliffs Natural Resources (NYSE:CLF), BHP (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale (NYSE:VALE) Move Up as Commodity Prices Surge

The expected positive disruption in the commodity sector has happened in a big way after the announcement by the Federal Reserve that they were going to resume inflating, and natural resource companies like Cliffs Natural Resources (NYSE:CLF), BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale SA (NYSE:VALE) all soared with the inevitable plunge in value of the U.S. dollar accompanying the quantitative easing.

Gold prices are soaring to new highs, as spot gold approached $1,400 an ounce at the end of closing on Thursday. Aluminum prices also reached levels not seen since April.

BHP closed Thursday at $91.20, gaining $5.12, or 5.95 percent. Cliffs ended the session at an even $70, rising $3.13, or 4.68 percent. Rio Tinto surged to close in New York at $70.52, increasing by $3.74, or 5.60 percent. Vale SA ended the day at $33.80, rising by $1.34, or 4.13 percent.

The overall commodity sector exploded Thursday as what appears to be pent-up expectation and anticipation concerning the Fed move poured out through investors putting their money into the commodity sector in a big way.

Marc Faber Says Gold Still Cheap

With gold prices breaking several all-time records this week, you would think most would think it's getting expensive to acquire the yellow metal, but not Marc Faber, who says gold bullion prices aren't expensive in his view.

At a CLSA Investors’ Forum 2010 in Hong Kong, Faber said, “Given all the unfunded liabilities and the money printing in the world and the size of the financial assets in the world, I don’t think we are in a bubble.”

While Faber doesn't believe we're in a bubble with gold, he does advise investors to increase their exposure on a monthly basis, and not to increase the percentage of their overall wealth too much into the metal, even as gold prices continue to skyrocket.

He also said there still will be strong corrections at times, a reason he suggest investing on a consistent basis instead of all at once.

Faber said under the right conditions, there could be a pullback as high as 30 percent. He cited the 50 percent drop in gold prices in the 1970s, where prices fell from $195 an ounce to $105 an ounce, although they resumed their upward climb to over $800 an ounce afterwards.

The point he's making is don't attempt to time the gold market.

Gold Prices Close at Record High

Gold prices didn't hit a record high today, but they did close at a record high, as the yellow metal gained $18.20 on the day to close at $1,248.70 an ounce, up from the June 8 record close of $1,245.60 an ounce.

Most of this is the result of continuing bad economic news, including plunges in new housing starts, increasing unemployment and the continuing European Union sovereign debt crisis which is far from over.

Data from the Philadelphia Federal Reserve's index of regional manufacturing plunged so far that some economic news outlets didn't even release the amount it dropped and how far it was below analysts' expectations.

The reading came in at only 8.0 for June, down from the 20 looked for by analysts, and down further from the 21.4 reading in May.

This is the lowest level of manufacturing growth in 10 months for the region, which includes Delaware, southern New Jersey and eastern Pennsylvania.