Quantum leap for gold

Today's daily dispatch from Gold Investments may be worth a read by PM investors and shareholders.

Enjoy -Bryan

...Credit Suisse warned Monday that supply and demand factors “could trigger a quantum upward change in the gold price”. David Davis, a research analyst at the bank said: “Our studies indicate that the dynamics surrounding the gold supply and demand have begun to change inexorably towards a diminishing supply of gold and increasing investment demand, which will ultimately impact the gold price.” The prediction is based on the assumption that “long term global gold production will begin to decline as the diminishing number of new reserves fail to compensate for dying mines”.

We would concur with Credit Suisse in this regard and believe that gold will experience a quantum jump in the coming months. A quantum upward change or jump is a sudden spectacular advance in the price and one which dramatically skips over intermediate stages. This could result in a gold price over $2,000 per ounce in a short period of time.

lies, damned lies and statistics

The US dollar falls to new record lows and oil and gold prices surged to new highs, meanwhile Wall Street fixates on meaningless government data that managed to report the lowest inflation in the last half century. These illusory numbers were integral in allowing the Commerce Department to report 3.9% annualized GDP growth in the third quarter, which was heralded by the bulls as evidence that a resilient U.S. economy had shrugged off the problems in the housing and mortgage markets. However, the government's ability to make "economic growth" magically appear is based purely on statistical finesse.

To arrive at this rate, the government had to assume that inflation during the quarter ran at an annualized rate of .8% (that's less than 1%). That is the lowest rate of inflation used to calculate U.S. GDP since the Eisenhower administration. With oil priced at almost $100 per barrel, gold futures trading over $800 per ounce, the dollar hitting record lows, and the Fed printing money like it is going out of style (12.9 % as measured by the old M3 model) the government has the nerve to claim that current inflation is the lowest it has been in half a century. Unbelievable!

Just in case there is some confusion, the government adjusts nominal GDP gains using the GDP deflator, which represents the inflation rate during the time period being measured. This is done to strip inflation out of the GDP calculation so that only real growth gets counted: not nominal gains that result purely from inflation.

The consensus estimate for 3rd quarter GDP growth was 3.4%. The reason we beat that number was that the government adjusted the nominal 4.7% gain by a mere .8%. Had the government assumed a higher rate of inflation, say 2.6% (identical to the rate used to deflate second quarter GDP,) the 3rd quarter gain would have been only 2.1%, well shy of the consensus forecast. My guess is that inflation is actually running at an annualized rate closer to 10%. Therefore using a more honest deflator, the U.S. economy is actually contracting, which would explain the recent anecdotal evidence provided by various economic polls, voter dissatisfaction and consumer sentiment numbers. In fact, if one simply measures U.S. GDP using gold or any other currency, it is clear that the US is already in a recession.

Dont believe their hype. got gold!?

How rare is gold?

If you gather together all the gold mined in recorded history, melt it down, and pour it into one giant cube, it would measure only about 18 yards across! Thats all the gold that exists above ground now, or since man learned to extract it from the earth. All of it can fit into one block the size of a single house. Its weight, 91,000 tons- less than the amount of steel made around the world in an hour. Thats rare!

10 % gainers

Back from my hiatus.

My four stocks that I touted for at least 10% in 6 weeks all made the mark except ECU which got real close, if memory serves it hit 2.78, so I missed by only .025, the others hit quickly, RSC was probably the best performer going over 3.50 (forgive me Im too lazy to check the charts) and XAU over 2.30, and CGP went over. 71

Now lets look at the prices today. ECU has been rocked by a financing that took it to the low 2's , has since recovered and is today 2.38 high so far, I recommend it as a buy here (2.28) I have a large core position.

XAU 2.18 high today, still holding a small core position.

RSC- I am out. On its last run to a 52 week high of 4.00, I sold most at 3.85, some at 3.91 and 3.74. Today RSC is a high of 2.48, and has taken a good beating the last little while. I timed this one almost perfectly, and I am staying away from uranium stocks for fear of a severe correction in the price of U308.

CGP high of .73 today, very strong in the last week. I no longer have a core position in this stock, but actively trade it.

+10% minimum in 6 weeks

Here are some stock picks that I believe will gain at least 10%, between now, march 26, and the end of trading on may 7 07. There are a ton more, im only putting these four out there now, they are not necessarily my slam dunks.

ECU 2.55
XAU 2.03
RSC 2.96
CGP 0.64

Subprime mortgage meltdown

"The regulators are trying to figure out how to work around it, but the Hill is going to be in for one big surprise. This is far more dramatic than what led to Sarbanes-Oxley, both in conflicts and in terms of absolute economic impact." —Josh Rosner, managing director, Graham-Fisher & Company

Since late 2006, 36 U.S. mortgage lenders have gone bankrupt, and there is talk in Washington of possible bailouts. Even GM is taking a hit from its finance division and exposure to subprime paper. And since the Fed can not afford to raise rates right now with the subprime mortgage meltdown going on, the dollar gets discounted.

Gold and silver are selling off as they track the equities, there is a flight to liquidity, but at some point I think the U.S. dollar is going to come under some serious selling pressure, and the dollar and the gold price will decouple. The fed may even have to lower interest rates to save housing, this too will help trigger a gold rush.

More real inflation numbers

GOT GOLD?????? -->Money supply growth last 12 months.........

United Kingdom M4 was up 13%
Euro zone M3 was up 10.6%
China M2 was up 15.9%
South Korea M3 was up 10.6%
Australia M3 was up 13%
Russia M2 was up 48%

Thats why I call this site "cash is trash"