World Currency Watch: FOREX Market, FOREX Trading BLOG

The “Other” $1,000 Gold

Why Gold’s Overlooked Cousin Will Leap Another 26% This Year

I know gold steals the show in the mainstream media, especially when gold tops $1,000 as it did over Labor Day Weekend.

It’s easy to see why gold gets all the attention. Personally I’ve had my eye on gold ever since I watched gold break out its triangle pattern around $950 an ounce.

Frankly, I’m not even a gold-bug. However, I do believe you should be on board when ANY asset is headed higher. That’s why I’m a gold bull right now.

However, as much as I like gold, there’s one commodity I like even more that just doesn’t get the publicity that gold does. But as far as I’m concerned, this overlooked commodity will actually rocket much higher percentage wise than gold. It also has incredible upside potential right now.

What commodity is that? Silver!

Yeah, gold is up 13% year-to-date but silver is up 55% year-to-date, and up 100% off its lows! Yet, still silver has room to climb even higher.

You can see from the chart below that silver can leap great distances in a relatively short amount of time. These aren’t anomalies either. Silver has managed to jump like this during several metal bull markets.

Gold’s Cousin Leaps Farther and Faster

Now, why in the world would silver spike higher from here? Well, actually there are several reasons.

Why this Overlooked Commodity Will Continue to Rise

1. The Cheap Inflation-Hedge: Silver is an inflation hedge just like gold. Also, silver is still underpriced if you compare gold directly to silver (the gold-to-silver ratio). This means silver is essentially the cheaper inflation hedge right now. In response, the big intuitional investors will start buying up both gold and silver as inflation starts to creep back into the economy.

2. Scared? Run for Silver: Silver is a great place to invest when investors are concerned about the markets. You see, on Tuesday alone, Obama asked Congress to raise the “debt ceiling” once again. China voiced its concerns over the huge debt loads and the Fed’s money-printing. Then the U.N. came out and suggested that there was a need for an “alternative currency” to the dollar. And that was just in one, 24-hour day. So the “fear factor” is definitely alive and well in the markets right now.

Also, if that weren’t enough…many investors feel that this is a “bear market rally” rather than the start of another bull market. Why? There are plenty of indicators right now that say we’re not facing a recovery here.

One of them is watching what happens in the railroad business. When railroad workers are polled and when the number of trains that are running are counted, it doesn’t point to a recovering economy where commerce is picking up and raw materials are being shipped.

3. A Falling Dollar: It’s almost to a yearly low as of this writing. Why? Much of it is due to the U.S.’s ever-increasing debt load. Then there’s President Obama. He keeps pulling rabbits out of his hat to try to fix this economy. Meanwhile, his approval rating just fell to a “52-week-low.” In other words, our government and nation is losing investors’ confidence both inside the U.S. and abroad. That means problems for the currency.

Gold Is Paving the Way for Silver to Follow!

At those times, money runs for “all things defensive.” Now formerly that has been commodities like gold, silver, the U.S. dollar, the Japanese yen and U.S. Treasuries.

However, now with the enormous debt loads out there, that list is shrinking. I think you can drop U.S. Treasuries and the U.S. Dollar from that list. With the new leadership in Japan, you might be able to drop the Japanese yen from the list. That one is debatable.

So where is the first place for “cautious money” to run to? Gold and silver.

If you’d like a “bonus reason” that silver will continue to go up besides inflation, fear, and the falling dollar…here you go.

4. The Working Metal: Silver is also an “industrial metal.” It’s used in many products that we use every day such as: high-tech electronic products, jewelry, fillings, to make money (commemorative coins) and batteries just to name a few!

So the supplies of silver are reduced all the time and used up more and more all the time. The more you diminish the supplies in the earth, and yet increase the demand for it all the time, it has no choice but to rocket up over time.

Silver’s Ascent to $21+ Will Help This Currency Pair!

For all these reasons, I believe silver could hit $21 – $22 by 2010. That’s why I’m holding some right now.

However, the “Forex guy” in me also is watching the currencies that will also do well when silver climbs. Specifically, I’m looking at the currencies that will sink and rise along with commodities.

In this case, it looks like the U.S. dollar will sink and the Aussie dollar will rise.

Australia, being the huge miner and exporter of gold that it is, will be a huge beneficiary. Therefore, buyers of AUD/USD have enjoyed the recent breakout in these metals and they are likely to continue to as long as the “metal rally” continues.

Bottom line: Stay strong the Aussie dollar, and silver.

Happy Trading,
Sean Hyman

EDITOR’S NOTE: Get the inside track on how to stockpile metals for your portfolio in our FREE special report. Click here to read it right now.

Where You’ll Find the Next Gold Bull Market

I’m in Copenhagen this morning…an absolutely beautiful city. I’ve been coming here since 1996 when I opened my first private baking relationship with The Bank of Copenhagen – later sold by its parent, Swedish furniture giant, Ikea.

This morning, I sold some U.S. dollars for Danish krone. As usual when traveling abroad, I received a pittance for my dollars in exchange. No surprise on that score…

My long-term readers know that I’ve got zero confidence in paper money over the long-haul. (In the short-term, sure, I buy currency plays like anyone else, but I’m talking long-term for the next few decades.)

But longer term, I believe we’ll continue to lose the dollar’s purchasing power vis-à-vis stronger currencies but especially against gold. The sad truth is that most people have no idea about this reality and continue to see their purchasing power eroded by inflation and devaluation.

I’ve been a gold bull for years and recently turned even more bullish on the gold stocks. I think we’re at the cusp of the next phase in this rally.

Gold stocks have surged more than 120% since hitting a multi-year low on the XAU Index on October 27 at 65.72. We’re long overdue for the next push to $1,000 and beyond – and this time gold will stay in the four-digit zone.

Gold Is Set to Outperform the S&P 500 Once Again…

The XAU Gold & Silver Index has two periods of seasonal strength starting from July 27 to September 25 and again from mid-November to early February.

Since July 27 the XAU Gold Index has declined 2.8%. Yet the trade has been profitable in 16 of the past 24 periods and has outperformed the S&P 500 Index by an average of 8.4% over this period.

But even more compelling is the seasonal advance that occurs starting in November.

From mid-November to the first week of February gold stocks have showed profitability in eight of the past 10 periods for an average gain of 13.9%.

But even more impressive is our special X5 ratio, created by The Sovereign Society research team.

Any time the X5 ratio trades at 5 or higher, gold stocks have thereafter earned big triple-digit gains. And the index sits at 6.55 right now.

The Dollar Continues to Sail Lower…

How the Dollar Plays into This Gold Rally

Finally, the U.S. dollar is an important part of this equation since gold usually, but not always, provides an inverse relationship to the world’s reserve currency. Gold prices and the dollar both gained in 2005.

The dollar might be oversold near term and might even muster a rally. But, as we progress into fall and into 2010, the United States will grow desperate to grow inflation. Rising prices are in short supply in 2009 amid deflation in household assets since late 2007, wage growth and real estate. A weak dollar would stimulate inflation.

I believe the authorities will quietly welcome a weak currency.

On the interest rate front, the Fed won’t be raising interest rates until 2011 at the earliest. The country is in such a mess right now that any preemptive strike against inflation would be utterly idiotic. Interest rates will stay low for a long time.

There’s a reason why rates are at or near zero percent. There’s barely any demand for credit.

Gold stocks will probably trounce most risk-based assets over the next 12 months as gold finally blasts through the $1,000 an ounce barrier and stays there. It’s time to buy gold stocks.

Best Regards,
Eric Roseman, Investment Director
The Sovereign Society

P.S. The Sovereign Society’s latest special report gives you the full insights on the next bull market in gold stocks. Get your FREE copy here.

$1,300 Gold Is Coming

By Sean Hyman

As I often say, it’s always good for currency traders to watch where money is flowing around the world. If you know where investment money is flowing, you know which currency is about to get a windfall.

The same can be said about gold.

Only when you’re talking about gold holdings, it’s better to look at who’s buying and selling their gold. Just look at the IMF…

Earlier this year, I told you of the IMF’s plans to sell about 403.3 tons of gold. The G-20 officially approved the sale this past April.

The IMF claims they’re selling gold to help “the world’s poorest countries.” Indeed, it is possible that some of those funds will go there. However, the #1 reason why they’re selling is because they need to raise some cash to meet their own budget deficit!

You see, the IMF owns a ton of gold…but it’s not like gold earns interest or produces dividends. Therefore, they are “gold rich” and “cash poor.” So every so often, the IMF must sell some gold to pay their bills.

I bring up this point because I want to ensure you that they aren’t selling gold because they believe it to be overvalued. On the contrary, they’re selling gold because it’s their most valuable asset.

It’s similar to how the largest investment banks and hedge funds sold off their gold holdings to try to balance their books in 2008. (In fact, that’s one of the main reasons why gold prices were relatively flat last year.)

But you know already know that gold is a valuable asset. Recently, several central bankers have shown they agree…

Forget the IMF. Look Who’s Buying Gold…

This year, China has continued to boost its gold reserves. In fact, their gold reserves have mushroomed a full 76% since 2003.

China’s latest gold purchase was no small sum either. The Chinese added 454 tons to their reserves. That alone is more than the IMF is selling. It also brought the Chinese gold reserves to 1,054 tons. That just edges out Switzerland’s holdings of 1,040 tons.

It’s no surprise to me that China is doing this. Their foreign exchange reserves have blossomed six-fold in six years. They have $2 trillion in reserves to spend. The Chinese recognize that long-term the dollar is in trouble so they are buying “undervalued commodities” as they put it.

So far, it’s paid off well for them. As you know, the dollar has been on a downward slant since March. As the Chinese load up on more undervalued commodities like gold, it helps to buffer their reserves from any depreciation in the dollar.

You can be sure they’ll be buying more too. They’ve got a $200 billion sovereign wealth fund just to invest in things like these undervalued commodities.

So in my mind, when it comes to gold reserves…China is probably the most important one to watch. It’s not that they hold the most, but in my opinion, they have the biggest ability to buy the most if they choose to do so.

Also, remember that China is now the world’s biggest gold producer, surpassing South Africa and Australia! Therefore, keep your eyes on China when it comes to gold.

So here are the world’s top holders of gold reserves. The U.S. takes the top spot by far, at a whopping 8,134 tons. (By the way, the U.S. NEVER sells its gold…which is interesting.) Germany is a distant 2nd place at 3,413 tons. The IMF has 3,217 tons. France has 2,487 tons and Italy has 2,452 tons.

But it’s not just China that’s gobbling up the gold!

But there are others that are ratcheting up their gold reserves for fear of dollar weakness coming.

For instance, Venezuela’s government has mandated that any gold they produce must be offered to their central bank FIRST. They’ll only sell to everyone else after the central bank takes in what they want.

So their government mandated that 70% of their gold must be sold locally and 60% of that 70% must first be offered up to their central bank. Then the other 30% can be exported.

This is a huge change in their government’s policies. The government used to say only 20% had to be offered to their central bank. Huge difference between 20% and 60% huh? I think it’s safe to say their stance on gold buying has changed dramatically.

Russia said it recently “increased its international currency and gold reserves to $391.3 billion from $385.9 billion.”

So why are all of these central banks “scampering” for more gold? Because they all have two commonly held beliefs, in my opinion: 1) They fear a further drop in the U.S. dollar is coming (which I agree). 2) They believe that gold is undervalued (which I also agree with).

Gold in “2009 dollars” Could Climb Well Above $2,200!

See the inflation-adjusted gold chart below. You see, when investors look at the historic highs for gold, they don’t always figure in inflation. For instance, 1980’s highs for gold are thought of in “1980’s dollars.”

However, even just adjusting for inflation through 2007, will show you the actual high for gold in 1980 was closer to $2,145. There are some that argue that in “2009 dollars” the number is well above $2,200. You can see this all on the chart below…

Yet right now, gold is comfortably consolidating in the mid $900 range. Therefore, I think in the near term (coming months), you will see gold hit $1,300 but ultimately, it could easily go up to $2,500 in my opinion.

So in short, I agree with the central bankers. Gold is still grossly undervalued. Watch for gold to soar later this year…

Happy Trading!
Sean Hyman, Professor FX

P.S. My colleagues and I recommend holding 5% to 10% of your portfolio in gold. Recently, our friends at The Sovereign Society have discovered a key technical indicator that allows you to predict the next upsweep in gold stocks. You can read all about it in the latest FREE Sovereign Society special report here.

A Summer for Currencies: Three Plays to Buy Right Now

By Eric Roseman In the absence of a major stock market decline or another financial institution blow-up this summer, it’s a safe bet to start nibbling at foreign currencies again.

For starters, we have the perfect environment for a weaker dollar. The U.S. Dollar Index (see the chart below) broke below important support levels last month. This means any dollar rally at this stage of the economic cycle should be tepid at best.

Also, the economy is stuck in a de-leveraging process that will take a few years to unwind. We also have scant bank lending and investors hoarding cash. This is not a macro environment that will boost U.S. short-term interest rates any time soon.

All Is In Place for a Lower Dollar Summer…

The United States and probably China, to some extent, desire a weak U.S. dollar to boost domestic inflation. U.S. consumer price inflation (CPI) is still contracting. In May, CPI declined for the third straight month to its lowest level since 1955. A lower dollar helps to grow inflation – a desperate commodity right now.

On Friday, China launched another currency salvo claiming the world should look “for alternatives to the U.S. dollar.” Such utterances won’t boost the buck but instead likely help facilitate a decline. Interesting how China would slam the dollar when she holds about 35% of all Treasury bonds in circulation.

(Of course, over the weekend, China did an about-face when Bank of China Governor Zhou Xiaochuan said, “our foreign exchange reserve policy is always quite stable,” which calmed speculation about the dollar for the moment. But I still see China wanting a weaker dollar going forward.)

Three Plays I’m Starting to Nibble At Now

On Tuesday, I began buying small positions for my managed accounts in Canadian dollars and Norwegian kroner. Gold remains 5% of my portfolio for now.

Though I remain cautious about commodities this summer, including oil and gold, I like the Canadian dollar and the Norwegian kroner because both currencies have relatively stronger balance sheets.

Norway, in particular, boasts a 10.5% budget surplus-to-GDP ratio – the highest among industrialized nations. This compares to rapidly rising or skyrocketing budget deficits across the major economies since late 2007. And Canada, though now in budget deficit, sports a small deficit compared to its overall economy.

What about the euro? The single European currency is probably better than the dollar but not by much. I prefer gold, NOK and CAD.

Several peripheral Eurozone economies are now in deflation and major trading partners to the East are in desperate need of bank capital. I’m still predicting some sort of blow-up in the Baltic Republics or the Balkans this year. Any macroeconomic collapse in these regions will hit the euro and the emerging markets new “bubble” hard.

The precious metals should rally if the dollar continues to weaken. But, like I said earlier, I’m just “nibbling” at foreign currencies here to build fresh positions that are part of a long-term accumulation strategy for my dollar-based accounts.

Any sell-off in risk-based assets this summer – highly likely ahead of earnings guidance and a 40% post-March rally – will drive the dollar higher.

That’s when I’ll add to my existing foreign currency holdings.

Another Exciting Summer Especially With China Involved

Gold and silver, however, remains hostage to traditional summer weakness in the commodities complex; gold is especially vulnerable near-term because jewelry demand has collapsed and any outflows from gold-related ETFs will drive the price sharply lower. I’m looking to re-enter gold around $875 to $850 and silver around $14.

It strikes me as fascinating that China is denouncing the dollar again. Something is cooking in Beijing and Washington. I’m thinking policymakers will probably welcome a weaker dollar.
This should be another very exciting summer marked by renewed volatility, especially in the currency markets, which have been largely range-bound for the last four weeks.

Best Regards,
Eric Roseman, Editor
Commodity Trend Alert

EDITOR’S NOTE: For 20 years, seasoned investment veteran Eric Roseman has been recommending the most contrarian investment plays at packed investment conferences, to hundreds of thousands of daily readers, and at his own asset management firm in Montreal. Six years ago, he launched his own commodity investment research service, Commodity Trend Alert. Ever since, he’s helped regular investors grab profits as high as 70%, 124%, 131% and 274% playing gold, silver, energy, agricultural commodities…and yes, even currencies. Get more details on his latest Commodity Trend Alert play here.

Only Gold Is Winning the Ugly Contest

By Jack Crooks, Editor
www.worldcurrencywatch.com

Gold did the deed. The precious metal closed over the US$1,000 mark on Friday as the Senate Banking Committee Chairman Chris Dodd sideswiped the dollar.

Mr. Dodd, a man who pontificates on any and every subject under the sun and never lets real knowledge of a particular subject area stand between him and the nearest microphone decided to try out the N word — nationalization! Traders viciously dumped the dollar on Dodd’s “deliberation.” 

Dodd Speaks, the Dollar Sinks

And of course the games continue! 

The dollar was sharply lower on opening in Asia last night with nationalization of U.S. banks ruling the headlines. But of course the U.S. isn’t the only one flirting with bank nationalization. Take a second look at Europe and Japan (and just about anywhere you care to look) and it’s ugly!  

The euro has already reversed 200 pips from its high overnight, likely due in part to Mr. Trichet weighty assessment that Europe’s financial system is under huge strain. I say weighty because one should never confuse Trichet’s statements with anything dribbling from the constantly flowing font that is Dodd. 

We were of the opinion U.K. banks would beat others to the race toward complete bank nationalization. But it’s probably splitting hairs as de facto nationalization seems the order of the day. Why buy financials in your 401(k) when you own them anyway?

I used to tell people that currency analysis was like being the judge at an ugly contest – the least ugly wins. But now, there is little that separates the degree of ugliness among all competitors. Thus, we have gold printing over US$1,000 and who knows where from here. 

Gold has soared against the euro, pound, Aussie and U.S. dollar; though it hasn’t made a new high yet against the buck. 

Gold Has Already Climbed Against the Aussie, Euro, Pound and Buck

We’re still sticking to our story that the world reserve currency will be buoyed at a time like this. But I have to admit that I’m covering my eyes when I see the U.S. government’s supercharged attempts to spend its way out of a debt deflation…ugh. 

Replacing public debt to the same or increasing degree in which private debt is written down (public debt really means private debt because the private sector does all the wealth creation - while government mostly destroys it trying to “help” us) is no way to allow the system to cleanse.

But with pontificating pandering politicians never more than two minutes away from a microphone, we seem to be stuck there. And I have to wonder why we aren’t seeing any “traction.” It is to cry, or maybe time to buy more gold. Maybe both!

“But Which Type Of Gold Investment Should I Be Buying?”

(HINT: The Kind You Can Save $600 An Ounce On, Duh!)

Yesterday, Tim Geithner stumbled out before the press and managed to say everything - and nothing - at the same time.

Let’s start with the obvious - “The recession is putting great pressure on banks.”

Really, Tim? We had no idea.

By saying nothing of substance, Geithner confirmed Wall Street’s worst fears: that Washington doesn’t understand the fix we’re in. (And even if they did - could they do a darn thing about it?)

We just watched the Dow plunge 382 points… And I wouldn’t be surprised if our next stop was 7,000.

However, One Investment Is Bucking The Trend…

Since December, gold has jumped 22.5% (from US$767 to US$940 an ounce). And I firmly believe we’ll see it trading for US$1,500 (even US$2,000) an ounce in the not-too-distant future.

If you’re thinking about buying some physical gold, you are not alone. Depending on where you look - you might even get shut out!

High demand for the yellow metal is rippling across the globe - from estate sales to eBay to the halls of Wall Street hedge funds.

Heck, I even heard that a luxury resort in Abu Dhabi is serving gold - sprinkling it on ice cream sundaes. (I’m not kidding - diners have literally devoured over US$500,000 worth of gold flakes!)

Now I’ve heard of “biting” a coin to see if it’s real - but swallowing it whole? That takes “Gold Bug” to a whole new level.

“What’s The Best Way to Hold Gold?”

Obviously - it’s not in your stomach.

Lately, my reader mailbag has been full of questions about bullion bars, mint certificates, e-gold and coins.

I’ll admit - it can be confusing to know what to buy or how to get a good deal.

My view is that every ounce counts - and you shouldn’t overpay just because some guy tries to “spook” you into a sale.

Sooo…

Before You Spend Even a Penny On (Any Form) of Physical Gold,
Here’s What You Need to Know:

One of the most popular ways to buy gold is through a certificate program - like the one made famous by Australia’s Perth Mint.

You hand over some cash - they give you a certificate that proclaims, “100 ounces of gold are being stored in your name.”

Don’t get me wrong - this is normally a safe way to own gold. The only downside is, you’re holding a piece of paper and THEY have your gold. In a time of economic crisis - this could pose a problem.

For example, what if, God forbid, international communications break down? Meanwhile your gold could be tied up, thousands of miles away.

I say this not to scare you out of holding gold certificates - but to prove the point that no one should hold all their gold in one location.

Okay, But What About…Bullion Bars??

Bullion bars offer an easy way to acquire 100 to 1,000+ ounces of gold - and pay a minimal “mark-up” or “premium” over the spot price.

That’s why I recommend them as part of your overall portfolio.

But still, there are two drawbacks to consider:

First - bullion bars take up a good deal of space. They can be expensive to insure, and store. In that way, they lose a little bit of their price advantage.

Secondly - I’m wary of another round of government confiscation. If the Obama administration follows in the footsteps of Franklin Roosevelt and outlaws gold ownership - bullion will be one of the first gold investments that gets seized and carted away.

How About American Gold Eagle coins…
Are They Good??

Bullion coins are enjoying a renaissance of sorts. In fact, yesterday’s Financial Times reported that coin sales have reached their highest level since 1988!

Last year, panicked investors stormed the U.S. Mint and bought up every Gold Eagle and Buffalo coin they had in stock.

Today, they’re still struggling to keep up with demand.

Yet I would NEVER advise you to buy a single coin from the U.S. mint.

I’m serious. Don’t touch them. They are way overpriced. Just because thousands of people are fleeing paper money doesn’t mean you should join their bidding war.

Here’s a BETTER Alternative… That Could Save You $600 an Ounce!

Recently, I’ve been researching different ways to own gold - and two months ago - I came across a little-known form of the yellow metal.

The shocking thing is, it has outperformed “normal” gold investments by a factor of 10… or more!

During the great Depression - it soared 69% overnight. And according to the indicators I track, it has equal potential today. Bottom line, it belongs in EVERY investor’s portfolio (at least in my opinion).

There’s just one problem - there’s very little to go around.

Here’s what I mean: Last year when 1.2 million of these “little guys” were offered, they sold out in just 11 months…now…this year a similar offering has been made, except, and this is critical - that 1.2 million has plummeted to just 50,000. That’s all that are being made available in 2009 - creating huge demand.

On eBay, “gold bugs” are lining up to pay over US$1,500 per ounce for this little-known investment… The World Gold Council says demand has spiked by 121%…causing national mints to shut down production.

Truth is, and it’s unfortunate, but only 1 out of every 300 our readers will even get an opportunity to invest in this rare form of gold - again, I’m sorry, that’s just the way it is - I don’t control the mints (especially not the foreign ones).

However, thanks to a recent cocktail meeting with a high-level gold executive - who wished not to be named - I’ve discovered a ‘weird’ little technique that could enable you to secure possibly as many as 10 (or more) of these wealth-builders - in the next 10 days - assuming you “get in” before they completely sell out!

FREE Webinar Reveals: How To Save $600 An Ounce,
Limited Seating, Register Now!

Listen. Come closer. This is no time to mess around.

The Feds are meddling with the economy to an extent I’ve never seen before - these “trillion dollar actions” have clear-cut consequences for your portfolio.

I will not say this little-known gold investment will not cure your every ailment, it will not. There are no magic “one-size-fits-all” solution. However, I can say with absolute confidence, those who sit idly by, watch passively, and remain paralyzed as the storm continues to “blow” will suffer the worst.

Doing “nothing“ is not an option. Not now.

As of this writing, 2,372 other “gold bugs” have already registered, re-arranged their schedules - and best of all - chosen to be proactive. Spots are limited - please click here to see if you qualify to attend.

You will discover there is simply no better way to own gold, right now, than in this rather peculiar little form.

Sincerely, Eric Roseman
Investment Director

P.S. Who would’ve ever thought it’d be possible to buy gold at a savings of US$600 an ounce? Certainly not me. My goal for you after this webinar is for you to immediately shutdown your computer, hang up the phone, and start using the strategies I share with you. Pretty cool, huh? See you there - register now!

The Case for Gold Confiscation

Very few people alive can remember the great “gold grab” of 1933.

That’s when President Franklin Roosevelt declared gold ownership to be illegal. Once he forced enough Americans to turn over their gold - in exchange for paper money - he revalued the price of the yellow metal from US$20.67 to US$35 an ounce.

What a rip-off!

That meant everyone was left - in the heart of the Depression, mind you - holding dollars that were worth a fraction of their former value.

Now, back then, most people didn’t hold gold coins. They held dollars that were “gold certificates.” They looked a lot like today’s greenbacks - except they were redeemable in gold - on demand.

Why would Roosevelt want to put a stop to this?

Simple. The government had issued far more of these gold certificates than there was gold to disperse. They painted themselves into a corner and were stuck!

So they did the only thing they could do - they simply voided the “gold contract” that was printed on the dollar (and every other gold contract - public or private). Problem solved.

But in doing so, the Feds created a massive headache for investors…

All of a sudden their gold certificates were worth a fraction of their former value. They had been duped! Paper gold was not gold after all. It was subject to government manipulation.

What does this have to do with 2009?

Well - once again, millions of investors have put their faith in paper gold. They’ve bought e-gold…mint certificates…and plenty of gold mining stocks.

Some of these investments have done remarkably well. And I wouldn’t advise anyone to sell all their “paper gold” holdings.

But I also strongly advise investors to hold certain types of physical gold. In times of a real crisis, nothing can provide more solid financial protection …

The Ghost of 1933 Returns

During the Great Depression, only one type of gold investment was exempted from confiscation.

And by confiscation - I don’t mean, “Pretty please hand over your gold.” Those who failed to turn over their metal could be fined US$10,000 and imprisoned for 10 years!

Given the choice between their gold and the pokey - millions of Americans parted with their gold…

Bullion bars were taken away…Double Eagle coins were turned over to authorities.

It was madness!

Could It Happen Again? Unfortunately, Yes…It Could

We’re in the middle of the worst recession since 1981-82. (Some might even call this environment a “soft depression” as banks are largely bankrupt.)

If the global financial system remains in tatters, gold could come under attack.

Should the government’s ongoing “stabilization efforts” fail; it would not surprise me to see gold top US$1,500…US$2,000 an ounce or more. And at that point, we would likely see some sort of concerted government action to freeze gold prices or even confiscate gold outright.

One thing is for sure - the Fed and its central bank buddies don’t want to see gold at these levels. Their actions could have a disastrous effect on gold exchange-traded funds, gold stocks…even gold coins.

That’s why I’ve raced to put together a report on the one form of gold (in the world!) that central bankers and panicked politicians simply CANNOT take away.

Not surprisingly - this rare form of gold is in short supply. (Heck, it’s been sold out or rationed for months.)

But a small quantity remains on the table for those who choose to grab it.

Save $600 an Ounce by Buying This Form of Gold

I don’t want to dedicate too much time to this Depression-era secret in this letter… because Executive Editor Justin Ford and I are putting together a special webinar (as we speak).

To be honest - we haven’t been this excited about gold in a while. Not only have we found a form of it that’s likely to be confiscation-proof. We’ve discovered a way you can get your hands on it and save up to US$600 an ounce!

If you’re perfectly happy with stocks - and trust the government to take care of your retirement and bank accounts, then this webinar is NOT for you.

However, if you’re suspicious of paper money - and the “dirty tricks” governments use to protect it…or if you’re curious about gold and want to know how and where to get some - and save US$600 an ounce in the process - then this FREE online event is definitely for YOU.

There’s just one catch… In order to attend, you need to sign up in advance.

To find out how and when you can tune in - simply click here.

Talk to you tomorrow,
Eric Roseman,
Investment Director,
The Sovereign Society

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Why Isn’t Gold Rallying Right Now?

By Jack Crooks, Editor of Exotic FX Alert
www.worldcurrencywatch.com 

Gold bugs call your office!

As gold goes so goes the dollar in the opposite direction?  That is what we’ve been seeing lately. Today, gold is sharply lower at the moment and trading below its 200-day and 28-day moving averages. Notice the classic lower highs and lower lows on the chart…

 

I continue to believe the markdown in growth out of China is key to the future path of gold. One thing to know about me: I have a basic agnostic gaze towards gold. I view gold primarily as a liquidity-driven risk appetite asset.

Whenever I write that, the gold-bugs tell me that gold is so much more. They tell me it’s a safe haven and a substitute for the ugly fiat currencies. And while I agree paper currencies are very ugly, I have to wonder:

How much more stimulus can governments possibly pump out and cheapen paper currency the world over? How much closer can we get to all out war in the Middle East? How much more dangerous can the Pakistan-India on-going quagmire become? How much have the probabilities increased for social unrest in China and the potential it has to destabilize all kinds of stuff?

I’m guessing things could get much worse, no doubt. But yikes! This is nasty stuff on the horizon that I can see taking shape. Yet the supposed supreme safe haven — gold — continues to fade while all this is happening.

Aren’t asset markets supposed to price in these expectations? Is anyone expecting these areas to improve anytime soon? Not that we’ve seen. Gold-bugs have gotten exactly what they have wanted and the yellow metal keeps fading.

So, gold bugs (and that includes you Dad if you are reading) it’s time to call your office!

Best Regards,
Jack

EDITOR’S NOTE: Jack may be shying away from gold this morning, but instead, he’s got his eye on a particular exotic currency that has the potential to hand his subscribers triple-digits in the next few weeks. This is the kind of timely advice that helped Jack grab five winning trades in a row last year – using an almost unheard of corner of the Forex market. Find out how he does it here.

The Final Crisis Currency to Buy on the Cheap While Credit Markets Are Still Clogged

By Chuck Butler

As I said, until these credit markets unlock, the markets will focus on the crisis and not the awful fundamentals in the U.S. economy. These awful fundamentals need to rise to the top again for risk takers to return to the markets.

Until we get risk takers back again, the dollar will continue to put all currencies and commodities like gold in a corner.

But that also means that right now is the best time to buy gold ahead of the next recovery. Buy cheap now, and hold it until Paulson and his boys can get credit moving again.

So why gold? Let me explain…

Yes, it may surprise you that I believe in gold as a currency. But I do. In fact, gold is still the world’s oldest currency. It’s still the currency most people run to during times of geopolitical tensions and inflation.

“Johnny Come Home Syndrome” Steals Gold’s Thunder…for Now

Of course, none of that has mattered lately. Gold has fallen from its high of US$1,038 vs. the dollar on March 17, 2008, to US$720 as of yesterday.

So what's happened? I call it the “Johnny Comes Home” syndrome. Essentially, the credit markets squeeze hit home in September. This was right around the time that Lehman Brothers closed and the Fed bailed out Fannie Mae, Freddie Mac and AIG. All these events sparked the unwinding of "non-dollar" investments to bring "home" dollars for the coming rainy days.

Since summer, we've seen gold drop, oil drop from US$145 to US$58. Stocks drop 30%, and currencies, as measured by the dollar index, drop 14%. Add to those losses, the losses in housing, and you can understand why everyone is flying to the only thing rallying – cash.

But as I said, once the credit markets stabilize, the markets will be able to focus on the awful fundamentals with the U.S. economy.

In addition, with the Fed leaving interest rates at historic lows, and most likely cutting rates even further, inflationary pressures are soon to regain their foothold in the U.S. economy. This is when gold will shine once again.

When will this happen? No one knows for sure, but given the amount of stimulus, low interest rates, and money supply I have to believe that credit markets will unclog soon.

So the idea is to look to buy at bargain prices. Buy low, sell high, right? If that’s the case, you may never find this great of deal for buying gold.

Looking forward to brighter days in the credit markets...

The Safe Haven Currency Returns with a Bang!

By Jack Crooks

In the last few months, the price of gold had been moving lower in a hurry…that is until earlier this week.

It seems gold’s traditional safe-haven quality came soaring in and swooped up the yellow metal. Prices went flying. On Wednesday, gold shot up US$92 overnight.

The rush of money into gold was strictly due to the lack of confidence and security in the rest of the markets. Many other asset classes are going up in smoke right now. The evidence of credit market chaos intersected in a whirlwind of surging Libor and commercial paper rates, plummeting three-month T-bill rates, widening TED and swap spreads and ongoing counterparty risk.

When all else fails, go to gold, right?

That’s what happened yesterday. And gold is extending and holding on to gains today. This week’s move changes the outlook for the metal quite a bit, as Dennis Gartman admitted in a Bloomberg article.

Will this force the buck to correct further? It could, and it probably will justify some more dollar selling. But honestly, I don’t think this dollar rally is over just yet. I see the dollar rising a bit more in the short-term… Either way, we’ll have to wait and see.