For 2008, the Trend is Your Friend with These Three

Wednesday, February 27th, 2008
By Michael Lombardi, MBA for Profit Confidential

As I sit down to write today’s column, three trends that I predicted and have been writing about for the past five years are continuing this very morning:

— Gold bullion prices are up another $10.00 to a new record of over $960.00 U.S. per ounce.

— Crude oil for April delivery on the New York Mercantile Exchange was up over $102.00 a barrel Wednesday.

— The U.S. dollar has dropped to a new record low against the euro: $1.50 to one euro — the highest level since the euro became Europe’s main currency in 1999.

Here’s a not-so-big secret: Rising oil and gold prices are directly related to a declining U.S. dollar. As China’s trade surplus with the U.S. in January was reported yesterday at a whopping 23% increase from January 2007, the U.S. dollar came under price pressure again.

The big question: What will the world’s fourth largest economy do with the nearly two trillion in American dollars it has accumulated over a decade of shipping cheap goods to the U.S.?

With China holding so many dollars, with the U.S. money supply rising so rapidly and with the Federal Reserve looking to reduce interest rates further to stimulate the fragile U.S. economy, there are simply more U.S. dollars in the world economy today than ever before. And too much of anything results in lower prices.

Investors around the world, seeking to find a haven outside the greenback, are turning to gold bullion and euros. Oil prices are not rising so much because the U.S. dollar is declining, but because of fear, oil producing countries might soon start asking for payment for their oil in non-U.S.-dollar currency.

Will oil producers eventually want gold or euros for their oil? In my opinion, gold will win the contest, as the weak U.S. economy spills over into other parts of the world, including Europe.

Investors have three outstanding investment plays at their hands today and a wonderful opportunity to make money from them. The three trends I predicted in late 2002/early 2003 are taking gold bullion and oil prices higher, while the U.S. dollar continues its collapse against other world currencies.

When I predicted in early 2007 that we would eventually see $100.00-per-barrel oil, I got many “laughs” from other analysts. As for gold, I’ve been bullish for over five years. At the very beginning of 2008, I predicted that gold bullion would reach $1,000 an ounce during the year…and we’re almost there.

The most common question I get now: “Michael, how much higher can gold bullion prices go?” Let me answer this with a question: Who would have ever thought that platinum would have hit $2,000 an ounce? It already has this year after being under $400.00 for most of the 1990s.

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Tags: euro, gold, gold bullion, price of gold bullion, U.S. economy

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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter