Gold plunged another $36 yesterday.
But this is not a fundamental shift, and there’s been no change in the big picture of supply and demand. And the decline is still well within the parameters for a major bull market punctuated by healthy corrections.
Ditto for oil and every other natural resource.
All we’re seeing here is hot speculative money pouring into these markets and then some of it pulling back out.
In these markets, the biggest rewards are reaped by savvy investors who separate themselves from the crowd … see through the emotional panic selling … promptly identify unique opportunities … and immediately take action to capitalize on them.
And that is exactly what you should be doing right now with natural resources, especially gold.
In a few moments, I’ll tell you exactly what you should be buying. But first, let’s examine three reasons why I believe gold and other natural resources are soon going to resume their trip to the moon …
Wall Street:
Dead Wrong on China
Pundits around the globe keep saying China’s latest economic measures — a stronger yuan and increased interest rates — are going to slam China’s economy … choke off demand for natural resources … and put an end to the great bull markets we’ve been seeing.
But as usual, the supposed gurus are simply WRONG! Sean’s recent article shows you why.
Moreover, Chinese officials wouldn’t dare think of trying to squelch their economy! They’re just taking measures to ward off overinvestment, making it more difficult for operators and speculators to overbuild.
And all the while, strong investment and demand continues unabated!
Of course, it’s easy to see why the so-called experts don’t get it … they sit in their ivory towers and pontificate … they rarely roll up their sleeves and get their hands dirty.
But I do. Over the last five weeks I have traveled to Bangkok, Chiang Mai, Shanghai, and Guangdong. In a few days, I head to Singapore.
I have walked the streets of Asia’s major cities … I’ve spoken with local merchants, entrepreneurs, and everyday workers. I’ve fought through jam-packed gold shops … watched oil tankers pull into teeming ports … stood on the bustling floor of the Shanghai Gold Exchange.
Nowhere in my travels have I seen any indication of slowing growth. To the contrary, all the signs tell me that Asia’s boom will continue for years to come.
After all, there are 1.3 billion people in China rapidly embracing a Western-style industrialized society. Each year, over 30 million rural Chinese flock to major metropolitan centers, determined to improve their living standards.
And that means buying lots of stuff:
- As Sean told you yesterday, 1,000 new cars are sold in Beijing every day. Here in Shanghai, it’s more of the same.
- Over four million new cell phones are sold every month in China.
- General appliance sales — TVs, air conditioners, refrigerators — are rising at more than 25% annually!
- Computer sales are increasing even faster — 30% annually!
As this rapid westernization moves throughout the rest of Asia, there will be an unstoppable tidal wave of three billion people, almost half the world’s population, improving their lifestyles all at the same time!
The demand for raw materials and products of all kinds will be unprecedented in the history of civilization!
As a result, we’ll see a major, long-term bull market in natural resources.
Worldwide Monetary
Inflation Set to Soar
Without any gold standard for the world’s currency markets, central bankers can — and will — print money like there’s no tomorrow to avoid or reverse economic downturns.
This is a very powerful monetary force, and it will drive inflation higher!
Fact: Money supply is exploding all around the world … in Canada, Russia, India, Israel, and Egypt … and in emerging countries like Pakistan, the Ukraine, Romania, and the Czech Republic.
But the worst inflation-pumping, currency-flooding central banks of the industrialized world happen to be some of the biggest economic powerhouses:
- U.S. broad money supply rose 4.9% over the past year … and it’s still surging!
- In the European Union, money stock growth is increasing at a sharp 6.3% annual pace.
- In Britain, money supply at the end of April showed an increase of 13.1% year over year!
- And in China, the broad money supply soared an amazing 18.9% over the 12 months through April.
The last time the world saw such a broad increase in money supply was 1977 to 1980. Over that period, the rate of inflation more than doubled … gold surged nearly eightfold … and interest rates in the United States zoomed to 20%.
Is it any wonder then, that even after the recent correction, overall price levels for raw materials are at their highest levels in 25 years?
Make no mistake: Inflation is about to accelerate higher, and that is bullish for natural resources.
Gold’s Chart Action:
Yesterday’s Decline Changes Nothing
Back in 1978, I was cutting my teeth in the gold and commodity markets as a technical trader. And to this day, I never make a move in the markets without studying the charts.
Like a picture, a chart is worth a thousand words. I use charts the same way cardiologists use EKGs … to gauge the market’s heartbeat and its overall health.
Looking at gold’s chart tells me one thing: The recent decline is nothing more than a normal, healthy correction back to the major uptrend channel.
And even if gold breaks slightly below, there’s an entire shelf of chart support in this area.
Bottom line: Gold’s chart confirms my view that we’re merely seeing a healthy pullback. The long-term bull market in gold is 100% intact. So …
Consider These Core Gold Investments
Gold Bullion. One convenient vehicle is 1- and 10-ounce gold ingots. For larger purchases, think about 32.15-ounce kilo bars.
What about American Eagles, Canadian Maple Leafs, etc.? No, because the premium you pay for coins could cost you the equivalent of several more ounces of gold bars over time.
One other piece of advice: Pick a dependable, trustworthy dealer. Here are some dealers I like:
- American Century Brokerage (800-826-8323)
- Dillon Gage (800-375-4653)
- Jefferson Coin and Bullion (800-593-2585)
- Rare Coins of New Hampshire (800-225-7264)
Gold Funds. Consider Scudder Gold & Precious Metals (SGLDX) and Tocqueville Gold (TGLDX).
And for even greater profit potential, see my Real Wealth Report for additional natural resources recommendations, along with specific timing instructions. If you’re not already a member, the current price dip in natural resources is a great time to join!
Best wishes,
Larry Edelson
Editor, Real Wealth Report
For more information and archived issues, visit http://legacy.weissinc.com
About MONEY AND MARKETS
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Colleen Collins, Amber Dakar, Ekaterina Evseeva, Monica Lewman-Garcia, Wendy Montes de Oca, Jennifer Moran, Red Morgan, and Julie Trudeau.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short blurb: This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://legacy.weissinc.com
© 2006 by Weiss Research, Inc. All rights reserved.
15430 Endeavour Drive, Jupiter, FL 33478
