Markets 'slip-n-slide' outta May
Tangible asset bull fueled by geopolitics, oil, ETFs, de-hedging, weak buck, demand
$642 gold! ... $12.47 silver!... Buy the dips! ... Snow out, Paulson in, stocks and dollar uncertain ... Fed frets over inflation ... Immigration frustration: Send-a-brick to Congress ... Consumer Confidence at 8-mo low ... Trust Iran? ... "Yes, $8000 an Ounce" -Barrons ... Undervalued Gold? ...facing inflation fears... Who expects $1,000+ gold? ... Morgan dollars soar... ... Gold to fight cancer? ... IN COINS WE TRUST ... "The Emanuel Code" - great parody!

By David Bradshaw, IdeaFactory News
Latest :60 "Golden Minute" -Listen- 2006 YTD: Gold +24%, Silver +42%
May 31, 2006

Precious metals traded lower Wednesday after rebounding on higher oil prices and a weaker dollar in the previous three sessions. Gold closed in NY down $7.30 to $643.50/oz. Silver fell 49 cents to $12.54/oz. Metals moved zig-zagged after the close on Fed inflation comments.

Gold prices closed out May one percent lower, but still up 24% ytd on firm fundamentals, while silver shed 7.7% in May, but remains up 42% ytd in response to EFT fund buying and speculation.

One of the key metal movers in May has been the falling dollar, which lost 2.9 percent last month and 6% ytd. Tuesday the dollar fell on news that Goldman Saks CEO, Hank Paulson was Bush's nominee to replace Treasury Sec. John Snow.

Commodities and high quality collectible investments are on track to outperform paper investments like stocks, bonds and CDs again in 2006, just like they have every year since 2001!

Meanwhile,"The S&P 500 had its worst May performance in 20 years, as concern over inflation, slowing economic growth as well as uncertainty over the outlook for interest rates plagued the market. U.S. stocks closed higher Wednesday ending a down month on a positive note," reports MW.

The Dow ended May down 2.4 percent, but remains up 4.8 percent ytd. Stocks have slumped since May 11, the day after the Dow came within striking distance of its all-time high and the day after the Fed raised interest rates for the 16th straight time.

The minutes of the Fed's most recent meeting on interest rates showed the central bank to be very worried about inflation. According to a summary of the minutes, Fed officials even debated the possibility of increasing its fed-funds rate by a half-percentage point.

Crude futures fell over $1 Wednesday to end 3% below the level they closed at a month ago, after officials said the U.S. will engage in multilateral talks with Iran if Tehran suspends its nuclear enrichment. Oil prices closed down 72 cents to $71.29 after jumping over $72 Tuesday, as a dispute between Iran and the West over Tehran's nuclear program rumbled on.

By FORTUNE's estimate, up to 40 percent of new-home construction in the U.S. is being done by undocumented immigrants. Immigration reform could kill the housing boom, but no one's talking about what a crackdown could do to real estate prices.

"The terminally ill U.S. dollar is heading in its only long-term path -- south," said Peter Grandich, editor of the Grandich Letter. "Gold's going to be a play against the U.S. dollar more than anything else in the short term," said Australia commodities analyst Andrew Harrington.

"Not only have the twin U.S. structural woes of a blow-out trade deficit and current-account gap returned to haunt the dollar, its apparent rate advantage seems to be nothing more than the product of mounting inflation fears", reports Reuters.

"The global dollar sell-off is accelerating. Gold has responded by racing past $500/oz., $600/oz., and $700/oz. We should expect market volatility, sharp price swings and corrections as the world's faith in the U.S. dollar declines and their faith in gold grows -- ever pushing it toward four-digit prices", says Craig R. Smith.


RECENTLY ARCHIVED NEWS (...you may have missed)

"We're overdue for a healthy 10-15% correction [in metals]. This is a long-term buy-and-hold market. If you only have 5-15% of a portfolio in gold it should be viewed as insurance against a drop in the other 85-95% of your investments. If it rises as it has over the long term, great, but I think people should be looking for safety first, not profit," Swiss America CEO Craig Smith told Doug Fabian's radio audience May 9th. [Listen]

As of last Friday, gold prices had corrected 11.5 percent from its 26-year high of $725/oz. on May 9th when speculators poured money into the metal on a weak dollar outlook and inflationary concerns. Silver has slipped 20 percent since it's recent $15/oz. peak.

Demand for silver rose in 2005 to the highest level in five years the Silver Institute said last week. The industry group, which is based in Washington, also said its annual survey indicated that investor demand for silver has been increasing, just as it has been for gold.

"Sustained interest from institutional investors drove the gold price to new 26-year highs in the first quarter of 2006. 109 tonnes flowed into Exchange Traded Funds (ETFs) and similar products, the largest quarterly increase in investment since the World Gold Council backed streetTRACKS Gold Shares listed on the NYSE at the end of 2004", reports FinFacts.

�It is gratifying that despite significant price volatility in Q1�06, in almost all categories, buyers are spending more on gold than they were a year ago. Particularly pleasing is the increasing interest from institutional investors with strong evidence that much of the demand is coming from new long term investors who are rediscovering the lasting diversification attributes of holding gold within a portfolio", James Burton, Chief Executive of the World Gold Council, commented.

Richard Russell's advice on how to turn junk paper into gold. "Take your junk paper dollars to a coin dealer, tell the dealer you want to swap your dollars for gold. Try it, I guarantee it works. But don't let all your friends in on this secret, because in time they'll all try it -- and drive the price of gold higher. I don't want them to do that -- at least, not until I'm finished buying all the gold I want."

"The gold value of the dollar appears to be going into free fall, and the further it declines the more dire the consequences, including still higher nominal prices for energy, even without any further change in the real price. Absent some miraculous reversal, $3-a-gallon gasoline may be here to stay", says Mr. David Ranson and Ms. Russell of H. C. Wainwright & Co., in Thursday's excellent WSJ column: "IN GOLD WE TRUST".

They continue, "Gold is the barometer of public confidence in fiat money, and it is difficult to rebuild confidence in a currency once it has been allowed to slide. Gold has been a reliable harbinger of many economic troubles -- not just of escalating prices at the gas pumps, but of inflation, rising interest rates, stagnation and poor investment performance on the part of bonds and equities alike. Changes in the price of gold are an excellent predictor of all of these. The dollar's collapse is nothing less than a body blow to capitalism."

"We are entering a critical new phase of the dollar's decline. In this new phase, not only will the dollar's value fall, but the United States could also suffer a flight of capital. Not only will you see each dollar buy less, but, more importantly, there could be fewer dollars available, as foreign investors slash the flow of dollars from Asia, Europe, and the Middle East ... or even pull their money back out", according to Safe Haven's Martin Weiss.

"This is a different gold bull market and most bullish of all is that fact that this is still a stealth bull market. The voice of the global market is just starting to express a declining confidence in the dollar but with a coverage of only 1.7% [in U.S. gold reserves] at close to $700/oz., I believe we are still in the very early stages of a major gold bull market. We have a long, long ways to go toward $3,000 and beyond" J. Taylor writes at Howestreet.com.

"The major thing about all these commodity prices rising, is that there is real long-term investor interest, it's not just speculative buying," Wolfgang Wrzesniok- Rossbach, head of metals trading at Heraeus Holding in Hanau, Germany reported to Bloomberg.

"Gold is now in one of the most powerful bull markets that I've ever seen, and I've seen a lot of bull markets in my 81 years. This gold bull market far surpasses in strength the gold bull market of the 1970s. This bull market is far bigger, it's far more international, and it has much stronger and broader fundamentals than did the bull market of the '70s", Dow Theory Letters' Richard Russell reported last week.

Gold may exceed $1,000 an ounce, Paul van Eeden, president of Vancouver-based Cranberry Capital LLC, said in an interview from Toronto last week. "While my model indicates gold should be fairly valued at $900, there's no reason to believe that gold wouldn't dramatically overshoot that mark. And if 1979 to 1980 is anything to go by, it could exceed several thousand dollars per ounce."

"Much to the chagrin of G-10 central bankers, traders have imposed a de-facto gold standard on worldwide exchanges. In other words, clandestine attempts by G-10 central bankers to pump up their equity and housing markets by increasing the money supply are being confronted with higher gold prices -- which is a central bankers� worst nightmare", says Gary Dorsch, Editor of Global Money Trends magazine.

CNBC hosted a "$1,000 gold" debate with Phillip Gottheff (the bull) and David Dietze (the bear) recently. Phillip easily won the debate stating ... "The gold market knows inflation is already here ... which helps explain the hysterical surge in prices this year... ETFs have expanded the metals market to now include institutional investors...With Goldman Saks forecasting $100+ oil I think we could see $1,000-1,500 gold easily... Why hoard? Because investors are afraid of paper. If we were to try to monetize our paper with gold the price would be in the $10,000/oz. - $20,000/oz. range."

WSJ reports:"The gold bugs aren't alone anymore. The investment audience for the precious metal is broadening as hedge funds and others seek alternatives to stocks and bonds. Because the gold market is relatively small, in terms of physical metal available and the number of investors who have traditionally participated, even a small increase in mass appetite for the metal can result in more price increases. Pick your reason. Gold seems headed higher still."

GATA's Bill Murphy said: "What you are witnessing is a rare market phenomenon � a bunch of trapped bullies trying to get out of their massive gold short positions in a market which is in a steep supply/demand deficit to begin with. There is a very good shot of a staggering gold price melt-up in the days and weeks ahead � one which will shock the investment world � as the GATA camp watches with big smiles on our faces."

"Gold's rise appears relentless, but buy strictly long-term, because sooner or later gold must correct. Gold, stocks, bonds, the currencies -- what does it all mean? To me, it's gotta mean inflation. I'll just stick with gold and try to sort out the rest", Richard Russell wrote in his Dow Theory Letters last Friday.

"I love gold, O.K.? It feels nice. It's exchangeable. It's money", said James Sinclair to NY Times Finding Comfort (and New Friends) in Gold ... "If we get close to $850 this year, it's most probable that we will see a four-digit gold price in 2007,"reported James Turk. [Ed. Note: NY Times has done GATA a great favor by running this story... go GATA!]

"As more and more investors start allocating more resources in gold, we could see $800 and as high as $1,000 by year's end. All the elements are in place for such a move, and it would not be unrealistic to achieve in a relatively short period of time," said John Person, president of National Futures Advisory Service.

Barrick Gold, the world's largest gold producer, joined the ranks of the world's de-hedgers lopping 4.7 million oz from its forward contracts book in the last quarter. The Mitsui report said full results would be available shortly, "with many companies still to report, including AngloGold Ashanti, dehedging could be even greater than our estimate."

Adding to the silver demand, Barclays' silver ETF has topped expectations and may exceed 100 million troy ounces within the first month, UBS said. This is up from a previous UBS estimate of 60 million.

Marketwatch reports... "The gold 'cartel' is imploding as we speak. The least talked about reason for gold's dramatic rise is the past shorting and manipulation of it by a group or groups who have been desperately trying to cover.", Peter Grandich, editor of The Grandich Letter.

"Sell stocks in May ... buy gold today!" says author and CEO Craig R. Smith. "Because the investment-grade gold coin market is smaller than the bullion market, it's less prone to daily speculators and offers an alternative investment for those who now feel compelled to diversify assets into commodities like gold."

"The chart patterns point to higher gold and oil prices. Gold should head for $750 in this leg, and then, after a brief (however, not necessarily shallow) correction, should try to take out the 1980 highs at around $900. The oil charts indicate a move into the vicinity of $77 to $78 relatively soon, and then, after a correction similar to gold, a move towards $100 per barrel", says Mike Paulenoff of MPTrader and a Marketwatch.com columnist.

"If we have one more big problem we are going to have triple-digit oil prices." said Adam Sieminski, senior energy economist at Deutsche Bank in New York. Sieminski points to confrontation with Iran, a worsening of the situation in Iraq or a recurrence of devastating hurricanes in the Gulf of Mexico as potential catalysts for a major rise.

Jeffrey Hirsch, editor of the Stock Trader's Almanac, thinks the Dow will peak at around 11,500 but could then plummet to around 8,500. This would represent a 26 percent plunge in equity values. "It could be a little more, depending on how ugly things get." See Headed For a Fall -USN&WR

"Evidence of a deflating housing bubble is spreading to places less visible to the naked eye. The chickens are coming home to roost on the variable-rate mortgages", Danielle DiMartino writes in today's Dallas Morning News. According to research by Moody's Investors Service, the yearly increase in mortgage interest paid by households rose to 15.8 percent in the first quarter �- a 24-year high.

"While the equity markets seem undeterred regarding the inflation threat, the gold and silver markets smell blood, and rose dramatically last week. I suspect the equity markets will shortly follow suit and recognize the inflation threat. The bearish consequences for stocks are clear", says Doug Kass at Thestreet.com.

"Nobody believes in the dollar any more. That is why fund managers are moving to commodities like gold, silver and even oil," an adviser to a hedge fund told TOI. "In 1971, the dollar became a currency solely based on the rest of the world's confidence that the US economy and its currency were managed transparently. With the end of the Fed's M3 publication in March, this transparency disappeared completely."

"Gold might rise tenfold in the next 10 years. If the Dow goes up three times in the next decade, I think gold prices will go up by a minimum 10 times to something like $6000 an ounce," said Marc Faber, founder of Hong Kong-based Marc Faber Ltd. Mr. Faber told investors to bail out of stocks a week before the 1987 crash and began recommending commodities in 2001.

"Time to put fresh money in commodities?" asked CNBC Closing Bell's Mario Bartiroma of Frank Holmes, CEO of U.S. Global Investors and Michael Cuggino, Pres. of Permanent Portfolio Funds last Thursday. Frank said he's "cautious in May, and may wait to buy the dips," while Michael said his firm remains "buyers of gold and silver bullion and coins because we're facing "a multi-year supply-demand mismatch."

"The secular bull market in commodities and gold is a long-term event. Sure, we could see a $50 correction in the price of gold, then up another $100. I expect $700 by the end of the year." said Frank Holmes to CNBC's "Morning Call" two weeks ago, after introducing him as manager of the "Best of the Best" mutual fund in 2005.

"In truth, the price of gold at $600 is no big deal. In 1980 dollars, it is only $300. If prior highs mean anything, a target of $1700 in today�s dollars is what investors should be thinking about. Investors should worry less about whether this particular moment is a good or bad entry point and ponder the implications of sailing through uncharted waters without a lifeboat," according to John Hathaway, of Tocqueville Asset Management.

President George W. Bush has warned rising oil prices will mean a "tough summer" for US consumers as the high cost of gasoline showed signs of becoming a big political issue. Under pressure to react to soaring gasoline prices, President Bush announced last week he would halt deposits into the strategic petroleum reserve and that federal regulators are probing for signs of price-gouging in the nation's fuel markets.

"Instead of demonizing big oil for 'price gouging' over the 8 cents a gallon profit they earn, politicians on both sides of the aisle should stop grandstanding and offer to do something constructive, like cut gas taxes, which amount to 59 cents a gallon" said Craig Smith to John Corby, radio host on WTVN in Columbus, Ohio last Wednesday.

"If the federal, state and local governments would take the lead in offering to cut gas taxes, even temporarily, my guess is that big oil would consider cutting profits to help bring some short-term relief to U.S. gas consumers. But remember, U.S. gas prices are cheap compared to most developed countries," Mr. Smith told listeners.

Craig R. Smith told CNBC "Closing Bell" host Maria Bartiromo two weeks ago, "Oil prices could spike over $105 a barrel given the explosive Iran situation and supply demand fundamentals. According to Merrill Lynch, each 1-cent rise in gas prices sucks $1.3 billion a year from U.S. consumer spending. That's $130 Billion gone from American wallets over the last year." (Watch)

"This market is ready to blow... the real problem is that Iran's real main weapon is oil. When push comes to shove they will do something about it," said Tony Nunan, an energy risk manager with Mitsubishi Corp's international petroleum business in Tokyo. "Gasoline and geopolitical risks are driving the market and neither have easy solutions."

Craig R. Smith recently commented to WND.com: "The rise of gold prices signals a loss of confidence in all 'faith-based' currencies worldwide. We're witnessing an amazing transfer of wealth from West to East. OPEC is raking in historically high profits, turning petrodollars into gold and divesting U.S. dollars in the process. In my view, we're only one major oil-terrorism-economic crisis away from $100 oil, $5 gas and $1,000 gold."

Jim Rogers, who foresaw the start of a commodity rally in 1999, told Bloomberg the boom in energy and raw material prices will endure, driving gold to a record $1,000 an ounce. "The shortest bull market for commodities lasted 15 years, the longest 23 years, so if history is any guide, they've got a long way to go. This is not a bubble."

Richard Russell's latest Dow Theory Letters (4/5/06) reports, "The new Fed chief Ben Bernanke doesn't believe in gold. He ignores the message that rising gold is telling us... this is the perfect setting for a monster bull market in gold and an equally massive bear market in paper."

GATA founder Bill Murphy notes, "Dennis Gartman was on CNBC two weeks ago talking about how the gold and silver move was a bubble. As soon as he got off the air, gold and silver really took off. What we are seeing is the result of years and years of a gold price suppression scheme BLOWING UP! Gold is moving up because the crooks have lost control!" Thursday Mr. Murphy told Miningweb radio,"GOLD is going to go to $3,000/oz as more geopolitical problems arise. (Free Murphy "Future of Gold" CD offer)

The GFMS Gold Survey 2006 published last week reports, "...hefty gains over the next year or two are quite possible ... the 1980 high of $850 could even be taken out." GFMS believes this phenomenon is still at its early stages but would not be surprised to see longer-term investors like pension funds enter the commodities market, propelling gold prices even higher. "You're playing with fire if you ignore the weight of money argument, looking ahead into 2006."

`Revolutionary' Fed Study Shakes Growth Forecasts reports Bloomberg. "A Federal Reserve study is shaking economists' forecasts by suggesting U.S. economic growth will have to decelerate more over the next decade than most expect. The study, to be published in July, finds that the retirement of the Baby Boom generation will force far-reaching adjustments in the way the economy works. Forecasts for everything from growth and employment to corporate profits and interest rates will have to be recast."

"Global stock markets are looking for an excuse to reverse," says Michael Belkin, president of Belkin Ltd., whose clients include hedge funds, institutional investors and wealthy individuals. "And once the current propensity to keep buying at the top is satiated, indigestion will set in."

"Rush of Investors to Commodities Fuels Gold Rally" said WSJ recently. "A stampede of mainstream investors into commodities is fueling gold's rally toward $600/oz. ... institutional investors are now expanding allocations between 1% and 10% ... Global supply and demand are the most important drivers ... gold is the potential hedge for all the uncertainties in this new and changing world." [Watch WSJ's Gene Colter explain why rising gold is "a self-fulfilling prophecy" on CNBC ... yet he remains bearish?... and clueless! -- Read $600 GOLD: WE'RE NOT SURPRISED! By Dr. Fred Goldstein]

"The recycling of petro dollars into gold as a form of money, and strength in demand for gold jewelry in India, will ultimately drive prices to $650 in 2006", said Mr. Holmes last December on CNBC Squakbox. He appears to have upped his 2006 gold forecast by $50.

Bill Bonner of DailyReckoning.com reports ... "The Federal Reserve will do what it takes to maintain its credibility, which is central to preserving the integrity of the US dollar," Dallas Federal Reserve Bank President Richard Fisher said on Tuesday, April 11, 2006. Answering audience questions after a speech to the Dallas Friday Group, Fisher said the US dollar is a "faith-based currency" dependent on the credibility of a central bank. "In addition to a faith-based currency, we are the currency of the world and we must maintain its integrity..."

How vibrant is your faith in our faith-based money system? Gold, of course, requires less faith than paper currency because it has a 6,000 year record of maintaining a store-of-value -- thus, you have in a nutshell the logic behind a 'revival' in the 'conversion' of faith-based paper money into store-of-value money like gold and silver.

According to Marc Faber, author of "Tomorrow's Gold" ... "In my book, public enemy No 1 are the central banks. I think the world will be much better off under a gold standard. Other than that, I think the asset inflation is much more dangerous than consumer price inflation because asset inflation is driven by a huge credit bubble. Then asset prices become very expensive and when asset prices go down it leads to recession. So the Central Banks will support asset prices and see to it that they keep on going up. So they will inflate more and more and eventually you will come to an economic collapse."

"But isn't it too late to buy gold now?" asked WOWO radio host Charly Butcher of Fort Wayne, Indiana in an interview with Swiss America CEO and author Craig R. Smith last month.

Mr. Smith's reply, "NO, it is not too late to get involved in the gold market because today we're looking at different fundamentals today than we had during the last bull market in 1979-80."

"Unlike 1979, when our nation faced a hostage crisis, $36-a-barrel oil, 16% inflation and 22% interest rates. Today we have $68/bbl. oil, 3% inflation (officially) and 6% interest rates. Other big differences; today we're facing a $9 trillion debt, $44 trillion retirement crisis and central bank gold buying (vs. selling). Meanwhile, gold supplies are diminishing while demand from China and India is increasing. Cumulatively this creates a new era for gold with a sustainable price target of well into the four-digits."

"$600 gold is just beginning the bull market's second phase. I expect the American public will soon join the gold rush in big numbers. So, this 21st century commodities bull cannot be viewed as a replay of 1979-80 where gold ran from $125 to $850 and then back down to $300. Instead, I see gold running through $700, $800 and $1,000 on it's way toward $2,000 level and then staying there."

Craig Smith recently told CNBC Squawk Box "Gold is clearly headed toward $1,000/oz. and is still a great bargain at $600/oz! Gold futures jumped over $600 Thursday -- however, we had a minor price correction Friday -- the sign of a healthy bull market and yet another opportunity to buy the dips in this ongoing secular bull market." (WATCH: Craig Smith on CNBC Squawk Box)

Mr. Smith's latest Special Alert released in early April, explains why gold and silver are still great bargains considering their true relationship to the falling U.S. dollar over the last 25 years and why investment-grade gold coins are outperforming bullion.

"Contrary to mass media financial headlines, gold is not really at "25-year highs" as reported -- This is only true if you ignore the effect of inflation and the falling dollar," says Mr. Smith. "Today's dollar is worth less than half its 1981 value, thus gold's 1980 high of $850 today would equate to a price somewhere over $2,000 today."

Lemetropolecafe.com reports, "Probably nowhere else is headline slanting more apparent than mainstream media's reporting on the precious metals. If you relied on Reuters, Bloomberg, Marketwatch, or nearly any of the other agencies giving accounts of the gold and silver markets for news, you would never buy a single ounce. Which is precisely what they hope will happen."

A new report offered by whiskeyandgunpowder.com sees $2,000 gold! ... "America has 8,180 tons - or nearly 261.7 million ounces - of gold in reserve. How many dollars does that buy? In 1980, for every ounce of gold in America, the financial system carried $6,966. That's $1.8 trillion total. At the end of 2005, the total real money supply shot to over $10 trillion. That's $38,349 in circulation for every ounce of gold in reserve!"

"Comparing yesterday's gold price to todays is apples and armadillos. In today's dollars, 1975 gold rockets to $750. 1980 gold, the peak year at $850, clocks in closer to $2,176. And this is only what you get using the Fed's own conservative numbers", says the "$2,000 gold" report.

Gold closed out the first quarter of 2006 at $581.50/oz., up 12.5% in Q1 of 2006 and 35% higher than a year ago. Silver out the first quarter at $11.49/oz., up 30% in Q1 of 2006 and up 55% since March 2005.

Bobby Godsell, CEO of AngloGold Ashanti, predicted that worldwide gold production would stagnate, then fall in the coming years as large deposits of the precious metal become scarce. He said this would support the rally in the gold price.

"The U.S. dollar is putting in a massive top and is primed and ready for a big fall," said Peter Grandich, editor of the Grandich Letter. "Such a move can only add to the many bullish factors already underpinning gold."

Citigroup raised its forecasts for gold, copper, nickel and aluminum and said metals are entering the "sweet spot of the Commodity Supercycle."

The Fed will push its interest-rate target above the yield on 10-year Treasury notes by mid-year, a potential prelude to a slowdown in economic growth, according to Wall Street's biggest bond trading firms.

Sales of new homes dropped 10.5 percent, the most in nine years in February, suggesting that unexpected strength in the housing market at the beginning of the year is dissipating. Special Report: "In Housing We Trust?"

Gold should outperform equities over the next few years, say technical analysts at Merrill Lynch & Co. because the ratio of the Dow to the price of gold is declining. Since 2001 the ratio has dropped from 40-to-1 to 20-to-1, reflecting gold's dramatic price rise in relation to stocks.

The SEC recently approved rule changes that will allow the American Stock Exchange to list shares in Barclays ETF (iShares Silver Trust). The fund would be backed by silver bullion held in vaults in London, with each share worth about 10 ounces of silver. Before the Silver Trust shares can begin trading, the SEC would have to approve a registration statement allowing the shares to be publicly issued. More on the new silver rush.

U.S. wholesale prices plunged 1.4% in February on lower food and energy prices but core prices were surprisingly high for the second straight month, the Labor Department reported Tuesday. The CPI has risen 3.6% in the past 12 months, down from 4% last month. But are these stats accurate in the real world?

The Senate voted last month to allow the national debt to swell to nearly $9 trillion, preventing a first-ever default on U.S. Treasury notes. The increase to $9 trillion represents about $30,000 for every man, woman and child in the United States.

"It took America 81 years to rack up one trillion in debt (1900-1981), only five more years to hit two trillion and now we are adding a trillion or more a year! Why the sudden increase? We're told told that inflation is only 3-4%, yet the debt is expanding at 12% per year -- where's the other 8-9% going? Could it be government inflation statistics are that far off?" asks author/CEO Craig R. Smith.

"From a historical perspective the rise of debt and inflation are the consequence of abandoning the gold standard," says Smith, who says "the price of gold is the only truthful financial plumbline left on earth," in his latest newsletter (The Rule of Gold).

Frank Holmes told CNBC recently that "A well known analysis is now suggesting investors hold 25% of their assets in gold, silver and platinum. When asked about the recent surge in silver he explained how the anticipated new silver ETF will increase the deficit in supply as millions of ounces are taken off the market to meet demand of the ETF."

Gold prices may reach $2,000 an ounce by 2010 on demand for an alternative to currencies, U.S. Gold Corp. Chief Executive Officer Robert McEwen said. "You have much more money than there is gold, and as people see their currencies falling relative to gold, they're going to be saying `Maybe I should have some of this'."

Marketwatch.com commentator Kevin Kerr sees a "Golden Opportunity: The case for $1,000 an ounce... If your thing is to hold the actual gold in your hand then numismatics (coins) or bullion are the way to go."

"Commodities trump stocks as long-term bet" reports Reuters. Oil, gold, grains and other commodities will outperform stocks and bonds in coming years, even after the rallies that have pushed some prices to historic highs, investment adviser Puru Saxena said on Thursday. "When commodity prices start rising due to supply and demand imbalances, then financial assets generally tend to under-perform. Investors ... need to take positions in commodities for the next 10 to 15 years."

Is this the last great buying opportunity for gold? asks AME... "Those who predicted that gold would suffer a sell-off at $500 an ounce were proven hopelessly wrong in the first seven weeks of 2006. The yellow metal has soared past the $570 barrier and its present retreat to above $540 an ounce is probably the last great buying opportunity before prices head to much higher levels."

The recent price corrections provide a good opportunity for physical consumers, "don't miss the boat again. Supply and demand fundamentals remain constructive for the uptrends to persist" according to Barclays Capital.

As for the significance of Dow 11k... "The problem is that stock indexes tell investors very little about the individual stock and virtually nothing about it's true value. Stocks in general are "priced for perfection" in a world that's far from perfect", according to Craig R. Smith. (see DOW 11,000... Not NOW!)

"Dr. Doom warns: 'Correction Time!'" to Wall Street. "At market tops Wall Street gets greedy and greedier. Main Street dumb and dumber. Washington blind and blinder. Widespread denial." says PAUL B. FARRELL refering to Marc Faber's latest market comment projecting a "vicious" drop in the Dow coupled with a "vicious rise in gold, possibly pushing gold to an astounding $2,000 or more an ounce."

The U.S. trade deficit soared to an all-time high of $725.8 billion in 2005, pushed upward by record imports of oil, food, cars and other consumer goods -- up by 17.5 percent from the previous record of $617.6 billion set in 2004. "It's not just China, it's not just oil, we spend more than we produce, end of story" said Jay Bryson, an international economist with Wachovia.

Barron's reported recently, "Investors have been fixated on Google the past few weeks, as its shares have tumbled nearly 25% from a peak of $475 -- and the fact is, there could be a lot more tumbling ahead. The share price could well be cut in half over the next year as the Internet giant grapples with growing competition from Microsoft and Yahoo!, increased pricing pressures in its online ad sales and mounting concern about what's known as click fraud."

"Gold's stunning price surge recently suggests panic short-covering by The Gold Cartel and their allies. They had hoped to create a gold debacle with their raid on Tuesday and it didn't work", says GATA Chairman Bill Murphy, host of the recent "Gold Rush 21" conference.

President Bush declared "the state of our union is strong" despite Americans' anxieties about the war in Iraq, the economy and soaring energy costs.

"America is addicted to oil, which is often imported from unstable parts of the world," Bush said. America must break its long dependence on Mideast oil and Bush rebuked critics of his stay-the-course strategy for the unpopular war in Iraq. Full Transcript

Author/CEO Craig R. Smith hastens to add, "America is also addicted to debt. Both oil and precious metals jumped up over 10% in January, which should be telling us something is out of kilter in the global economy. As with all addictions, a new strategy is needed to help America achieve both oil and debt independence. Mr. Smith's advice to CNBC on how to end the Mid-East oil stranglehold...

Frank Gaffney reports,"There is reason to believe the Iranian regime is working toward a capability that could destroy America as we know it. As a result, America could be transformed from a 21st Century superpower into a pre-industrial society almost instantaneously."

"A report to the Congress last year found a single nuclear weapon detonated in space high above the U.S. could unleash an immensely powerful electromagnetic pulse (EMP). An EMP wave would damage or destroy the electrical grid upon which our society utterly depends.

J.P. Morgan announced recently that gold prices may reach $800 an ounce by the end of 2007 on supply worries, firming jewelery demand, geopolitical concerns and favorable currency environment. Prices might jump over $600 in 2006, if Iran's nuclear issue heated up and oil hit $100 a barrel, J.P. Morgan said.

The bull market may attract even more new money in the coming years, with potential for bigger price spikes. "Like a gorilla with a gun, gold can go anywhere it wants," said Peter Hillyard, head of metals sales, ANZ Investment Bank.

"This is the year to watch out for the end of the great American spending binge," Morgan Stanley Chief Economist Stephen Roach told the 735 attendees of the World Economic Forum in the Swiss resort city of Davos. CBNC interviewed George Soros, asking his opinion of the U.S. markets amid all of the positive talk from government and industry leaders in Davos -- his response? "Think Titanic ... I see people dancing while the ship slowly sinks in a sea of debt."

Ben Bernanke: An unworldly professor -- "The new chairman of the US Federal Reserve has spent the best part of his life studying the archives of the 1930s, engrossed in the arcana of monetary policy under the gold standard. So far, he seems airily insouciant over a US current account deficit nearing 7pc of GDP, or over the disturbing news that Americans are now drawing down net saving to pay bills at the fastest rate since 1933. "I am a Great Depression buff, says Bernanke."

Swiss America CEO, Craig R. Smith comments, "Escalating geopolitical uncertainty, rising oil and commodity prices and a reckless disregard for the stock market risks are a formula for disappointment and declines on Wall Street unless investors wise up and diversify assets into other markets."

"The American public has not yet understood the stranglehold that Iran and OPEC has upon our future oil supplies -- nor the race between nations to devalue their currencies (including the dollar) -- nor the reason Central banks are buying gold and selling paper ... but they will in due time." says Smith.

"Finding financial truth or value without a plumb line is impossible. The plumb line used to be the U.S dollar, until it began a steep decline in 2002. Today gold is emerging as the new international plumb line, in a cockeyed world of paper and debt -- which explains why it has doubled in value over the last five years -- AND why why it will double or triple again in the next five years." (see Introducing THE RULE OF GOLD).

Adam Hamilton, of ZEALllc.com asks, "Is gold really at a breathtaking 25-year high once the radically changing measuring stick of the US dollar is considered? Not even close! So far in real terms gold has barely clawed back above where it languished for years in the mid-1990s. The recent real-gold prices still look dirt cheap compared to average gold prices of the last 35 years or so. It is not prudent or valid to compare today's dollars to dollars of decades past without adjusting for inflation. Whenever the financial media insists on doing this it is lazy at best and intentionally trying to mislead investors at worst. We won't really see 25-year gold highs until the metal exceeds $1250!"

We're not surprised last year, millions of prudent investors worldwide came to the same conclusion: a portfolio without gold was a luxury they could no longer afford. Gold closed out 2005 at $517.40 an ounce, and is forecast to gain further in 2006 as funds and investors see it as a safe haven amid worries about inflation, economic growth and geo-politics.

"Commodities are an asset class for the first time in history", says Barrons Roundtable member Mark Farber, who "thinks the price will eventually exceed $3,000."

"The U.S. rare coin market looks strong in 2006 as many first time clients have begun to purchase collectible gold coins for their portfolios. They are taking a percentage of their wealth and diversifying out of paper assets and into tangible assets. Any pullback in spot gold is EXACTLY what they are looking for to get started", says Tom Rodriguez, Sr. broker at Swiss America.

"Gold's recent correction serves as a timely reminder that nothing, especially not gold, rises in a straight line", says Alec Hogg at Mineweb.com. "Since the Bull Market started in mid 2001, the gold price's progression has been marked by six distinctive mini-cycles.

"First of these saw its value rise from around $250 to $280. Gold then consolidated around $275 before its next sprint, to $325 (in 2002). Next came a run from $300 to early 2003's new peak of $370, followed by the retracement in the gold price to $330 and the subsequent rise to $425 (early 2004). In 2005 the run saw gold moving from $380 to $450 before consolidating around $420. That was where the most recent surge started, with the price touching a 24-year high of $540. All of this suggests the four year long Bull Market is intact."

Gold's 18% annualized gain in 2005 is over SIX times higher than the S&P 500 -- a performance that has speculators and long-term investors actively accumulating during any price dip.

GATA Chairman Bill Murphy told Canada's Globe & Mail recently, "The forces of darkness are finally on the run," refering to the recent rise of gold as proof of the victory over central bankers, political heavies and the conspiracy of silence that has kept his message of gold market manipulation out of the U.S. media. Story: Major Gold Bug Says Conspiracy Beaten. Free CD Offer featuring Bill Murphy Interview.

Buying gold under $300 an ounce?

Using the Fed Inflation calculator, the recent high in gold of $600.00 "2006 dollars" today equates to just $285.00 "1981 dollars". So, for gold to reach $850 '1981 dollars' again, it would have to top 2,200 '2005 dollars' (see chart)

"Why is everyone so bullish on bullion?" asks The Washington Post.

"Investors traditionally pile into gold as a safe haven when the dollar drops, inflation rises and economic calamity looms. The trouble is, none of those things appears to be happening. The dollar is rising, inflation appears in check and the U.S. economy, while shaky in spots, does not seem headed for immediate disaster. Economic reports released Tuesday were uniformly rosy. Consumer confidence, demand for big-ticket durable goods and new home sales all were up."

Richard Russell (Dow Theory Letters) has an answer... "Gold has entered a new phase. This phase is characterized by gold separating itself from all paper currencies including the dollar. It's clear that something has changed -- that gold is now being accepted by sophisticated investors, not as a speculation, but as an alternative currency. Thus, over recent weeks while the dollar was strong, gold has continued to climb. Such action would have been considered almost impossible even a few months ago.

"Gold is now being accepted as the fourth currency along with the dollar, the euro and the yen. But there is a difference. Gold is also being recognized as the tangible currency and the ONLY SAFE currency. That gold pays no interest -- but is still at an 18-year high in terms of dollars -- is a testament to its value and safety in the eyes of sophisticated investors."

A mere five years ago, gold was considered the laughing stock of the financial community. But who's laughing about the wisdom of owning gold now?

In the words of the soon-to-be-former Fed Chairman Alan Greenspan, 'If you want to know where interest rates are going, watch gold!'

According to entertainer (and long-time Swiss America customer and friend) Pat Boone, "The rising price of gold SHOULD be telling you that interest rates are rising and so is inflation! Over the past five years GOLD has quietly become the hottest commodity on earth, and thus, the price has doubled. But, the price of gold is still reasonable compared to our national debt. The entire world is now rediscovering the wisdom of owning gold. Shouldn't you? I recommend calling the number one name in U.S. gold coins, SWISS AMERICA for the number one book on gold, Rediscovering Gold in the 21st Century by Craig Smith." For details, read Swiss America's NEW Special Alert, GOLD RUSH, Phase II ... "The gold market entered the second phase of the bull market in 2005. Rising inflation and out-of-control debt will no doubt continue to drive gold up in 2006."


2006 SPECIAL ALERT:
Welcome to The New Gold Rush, Phase II

Are you starting to realize its time to buy gold, but don't know how to go about it? You're not alone! Every day more investors notice that rising gold, silver and investment-grade coins offer long-term stability and growth potential -- a rare combination in today's uncertain investment world.

Gold bullion, which recently topped $700/oz. has quietly become one of the best investments of the new century. Yet gold is still a great bargain considering it's true relationship to the falling U.S. dollar over the last 25 years. Gold's peak in 1980 was $850/oz., but using inflation-adjusted numbers, the same peak would be $2,200/oz. today!

(2001 to 2005) GOLD RUSH: PHASE I - "I WISH I'd bought gold/silver last year"

Beginning in 2001, gold, silver and investment-grade coins began a long-term or "secular" bull market. Since then, other tangible "stuff" -- like real estate, commodities and collectibles -- is where big money has been moving. Here's what has happened to gold prices over the last five years in a nutshell...

Since 2001, gold bullion has moved up 130%, but high quality U.S. rare gold coins are up as much as 150%!
* In Sept. 2001, gold was $280 ... By Sept. 2002, gold rose to $320 ...
* In Sept. 2003, gold topped $380 ... By Dec. 2004, gold hit $455! ...
* In Dec. 2005, gold topped $500 ... By Apr. 2006 gold hit $600! And so gold's systematic rise continues until this day.

(2006-) GOLD RUSH: PHASE II - "It's NOT too late, the trend is your friend!"

Phase I was just the tip of the bull markets horn! Now that gold has broken above $600/oz., we have begun "Phase II" of the bull market in commodities and coins. During this exciting and sometime volatile phase we believe tangibles such as investment-grade U.S. gold and silver coins will experience accelerated growth.

In this brand new 2006 SPECIAL ALERT you'll discover ...

* WHO: RECENT NEWS HEADLINES ADVISE, "BUY BIG MONEY"
* WHAT: RISK VS. UPSIDE POTENTIAL IN PRECIOUS METALS
* WHY: INVESTMENT-GRADE COINS ARE "THE TRADE OF THE DECADE"
* WHICH: COINS ARE THE TOP TANGIBLE ASSET PERFORMERS

Take the first step toward grasping this golden opportunity today! And remember, when it comes to gold investing, you're not alone anymore, thanks to Swiss America!

*BONUS CD: "The Future of Gold and Silver" CD a 30-minute private interview between Swiss America CEO, Craig Smith and Gold Anti-Trust Action Committee chairman, Bill Murphy recorded in 2005.

Register for a free copy: "2006 GOLD RUSH PHASE II or call 800-289-2646.


ABOUT THE EDITOR

David M. Bradshaw is Editor of REAL MONEY PERSPECTIVES, a new, syndicated daily financial/cultural news digest. In 2001, he published REDISCOVERING GOLD IN THE 21ST CENTURY: The Complete Guide to the Next Gold Rush and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 2004, he produced "A CITIZEN'S GUIDE TO COUNTER-TERRORISM" a free-to-the-public educational resource on DVD and CD. In 2005, he released a new CD, "WHAT'S YOUR WORLDVIEW?" a one-hour CD sample from his 24-hour series, "THE BIG PICTURE: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. Read my 2006 book review of, "The Meaning of Life" ... MORE at MIF... PERSONAL NOTE: Youngest daughter Braida Zoe (age 2) feeds herself, climbs everything, swims, trampolines, knows her flashcards, speaks in sentences, and... is my paddleboating partner.


DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Swiss America. Past performance of any investment is no guarantee of future performance. All investments have risk.

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