For five years, I have been preaching the merits of investing in quality gold producing stocks. My economic thoughts during the past half decade have been concentrated on the eventual effects of the expanding money supply, inflation, deflation, deficits, savings rates and the fact that countries no longer want strong currencies.
At one time, every country wanted a strong currency. Today, because of the “globalization” of world economies, countries want weak currencies in order to achieve their goal to be net exporters, not importers of goods. If countries want weak currencies, where are investors to find security for their money?
Over the past 10 to 15 years, most industrialized countries have sold their gold bullion holdings. Simply a stupid idea! Throughout history, in time, the actions of governments are often proved incorrect. And I believe the bulk sale of gold bullion by world governments will be a case in point.
The sale of gold bullion by world central banks will eventually come back to haunt those banks, as they may one day need to buy the back the gold they so cheaply sold. If the goal of most governments is a weaker currency, what currency will the oil producers accept for their oil? Gold may prove to be the only acceptable currency for oil.
>From a technical perspective, gold bullion prices are now on a runaway path above the trend line — an extremely bullish action in my view.
Gold bullion is now trading at about $730.00 U.S. per ounce. (I had predicted earlier this year that gold would surpass the magical $700.00 U.S. per ounce level.) At present, gold is at a 28-year high and closing in on its record high of $850.00 U.S. per ounce set in early 1980.
I believe the money supply in the U.S. will continue to expand at ridiculous levels. I also believe Bernanke has proven to be another Greenspan, ready to bring down interest rates to save the butts of investors and Wall Street.
The savings rate among Americans is quite pathetic. And with the U.S. dollar continuing on its downward path, I expect to see gold bullion prices continue to rise, taking the stock prices of quality gold producing stocks with them. The only investment hitting new record highs will continue to do so.