The Many Symptoms of Inflation

Inflation is a disease with many symptoms.

It can manifest itself in the form of housing prices that go berserk … like they have for the last few years.

It can show up in the form of long-term interest rates that surge dramatically … as they did yesterday.

Or it can pop up in the guise of exploding prices for gold, silver, platinum, and copper, all of which have just gone through the roof.

Dont expect all of these inflation symptoms to appear all of the time. Some will recede temporarily while others replace them in the limelight.

But regardless of which market is taking its turn in their grand game of leapfrog, the end result is a broad upward wave driven by the continuing drumbeat of inflation.

In other words,

No matter which inflationary symptom you may see at any given moment, the underlying disease persists.

That inflation is not going away. Its getting worse. And its spreading rapidly throughout the world. Indeed,

This Week, We Witnessed One of the
Most Classic Inflation Signals of Our Time

Im talking about gold.

It touched the psychologically critical $500 barrier.

It set off a chain reaction of similar price explosions throughout the precious metals markets.

And it put gold front and center on the radar screen of investors all over the world.

Kudos to Larry for not only forecasting this event far in advance … but also for sticking to his forecast despite widespread industry criticism.

And congratulations to all our loyal readers who were wise enough to reject the gold nay-sayers, holding their core gold investments through thick and thin.

Whats Next for Gold?

It would be normal for the yellow metal to pull back temporarily from these, or from somewhat higher levels.

But if it does, dont let that shake your confidence in gold-related investments one iota. Quite to the contrary, if you have little or no allocation to gold right now, use it as an opportunity to bolster your position.

I just spoke to Larry about this a short while ago, and theres no change whatsoever in his view:

Now that $500 has been reached, the next target is $540. And if thats breached, all bets are off gold could catapult higher much like it did in the late 1970s. Adding to the evidence: Other metals and commodities are confirming and double-confirming the trend.

The price pattern in platinum, for example, can sometimes contradict the pattern in gold.

But that certainly is not the case today.

Platinum has clearly breached the $1,000 level, confirming the parallel break-out weve just seen in the gold market.

How This Phenomenon Is Not Limited Just to Precious Metals

We see the same thing happening in copper, aluminum, zinc, tungsten, iron ore, steel. We see it in virtually every commodity under the sun.

The one exception: Food prices, which have been weak so far.

But despite the decline in food prices … and despite the recent correction in energy … overall, commodities are still going through the roof.

Thats whats driving the stocks of companies that are most deeply rooted in these commodities.

Case in point: The 20 companies included in the Morgan Stanley Commodity Related Index.

The index, which doubled since 2003, is now on the verge of another all-time high.

In 2000-2002, while the rest of the market sunk into the longest bear market since the Great Depression, this index continued to hold its own, zigzagging gradually higher.

And beginning in 2003, while the rest of the market was just recovering, this index skyrocketed.

It includes Placer Dome, Phelps Dodge, Alcan, Schlumberger, Archer-Daniels-Midland, Alcoa, Newmont Mining and 13 other natural resource companies some of which we have been recommending in our newsletters, some of which we have not.

In either case, nearly all have been good investments, and nearly all are now capitalizing on the natural resource boom.

Right now, we dont believe the indexs current price level fully reflects the dramatic surges weve just seen in metals.

Why? Because, despite the fireworks going off in markets like gold, silver and platinum, most investors still dont get it.

They seem to underestimate the explosive power of commodity supercycles like this one. Or, out of force of habit, they are reluctant to shift their focus from traditional stocks to natural resource stocks.

Thats too bad for them. But it could be good for you, giving you buying opportunities that could be more expensive otherwise.

Our First Recommendation: If youre already on board with the recommendations weve made, stick with them.

This is a wild and woolly bronco. But youre firmly in the saddle. So just hold on tight.

Our Second Recommendation: If youre still on the sidelines, its not too late to start now. What youve seen in the past three years is just Phase I of a much grander cycle. Moreover, Phase II is likely to exceed the first both in terms of speed and magnitude.

Our Third Recommendation: Theres no time to waste. But that doesnt mean you must act in haste. If you jump into investments that have already gone through the roof, you could get caught in the next correction.

For investors holding large open gains, thats not a serious issue. But for new investors who want to start off on the right track, it can be disconcerting.

For general insights into which investments we like the most, continue following our daily e-mails. And if you missed some recently, go back and read them. Theyre chock-full of great ideas you can use, either on your own or in consultation with an advisor.

And for specific timing signals and detailed buy-sell-hold recommendations, in a complete and diversified portfolio of investments designed for these times, be sure to follow our two monthly newsletters.

If you get both of them already, great. If not, the latest actions in gold, platinum, silver, and other commodities are shouting from the rooftops with a very simple message:

Nows the time.

Larrys Real Wealth Report is devoted to natural resources, with understandably superlative results.

My Safe Money Report, primarily for more conservative investors, is broader but equally important.

The cost for both is less than 60 cents a day.

Best wishes,

Martin

2005 by Weiss Research, Inc. All rights reserved.
15430 Endeavour Drive, Jupiter, FL 33478