Fed sparks gold fever
Gold back over $600, +18% ytd, Silver +24% ytd

$613 gold! ... $10.97 silver!... Gold rally no flash in the pan ... "Golden Op" -ADENS ... Inflation, Deflation, or Bust ... Bad data + weak Fed = Buy gold ... Bernanke vs. recession ... Stocks jittery... $73+ oil ... Inflation Solution! ... IN COINS WE TRUST ... Buffalos arrive! ... Rare coin prices breaking records outside U.S.... "truth, justice and all that stuff." ... Liberty Within ... Read Founding Docs ...

By David Bradshaw, IdeaFactory News
Latest :60 "Golden Minute" -Listen-
June 30, 2006 ~ Updated hourly 7a-7p PT M-F

Friday gold closed in NY up $27.30 to $613.40/oz. on higher oil prices and a broad dollar sell-off following the Fed's interest rate decision which offered hints they may take a breather after 17 consecutive rate hikes.

As of Friday gold had now rebounded 12 percent from it's recent three-month low near $546/oz. after aggressive fund and speculative selling was triggered by a stronger dollar, softer oil prices and hot money fleeing commodities.

"Gold fever rages on despite the metal's 24 percent jump in a month to 26-year highs followed by an even faster retreat. "This is a serious bull run. Those people who think it's a bubble ready to burst might be disappointed," Tony Dobra, director of global commodity derivatives at Standard Chartered Bank, told Reuters.

"The way I see it, gold has made its bottom. It's just starting to wake up from a generation-long slumber ... prices are not just going through the roof, they are going to the moon before this bull market is over", says economist Doug Casey.

"The Fed members' ability to still command credibility (after two bubbles in five years and various other blunders) continues to amaze me. But I suspect that, before this year is out, the Fed's credibility will be in short supply. The little rampage in gold about a month ago was just a taste of what things might look like when the Fed is finally understood to be trapped and not in charge", opines Bill Fleckenstein at MSN.

"A small investment in gold could protect some of your assets from inflation or a falling dollar", said John Waggoner in last Thursday's USATODAY. "Sooner or later, the Fed will have to stop raising rates or risk recession. Then, foreigners will have one less reason to buy dollars. The dollar's fall could resume. And so could the rise in gold."

"The gold story is a long-term story - the bull market is established and nothing that has happened recently changes that. At this stage, it is quite clear that only a minority of investors own gold. We would only worry greatly if a decline in the price occurred at a time when everybody and his brother owned gold," says the latest Onassis Newsletter.

"The recent metals correction may be the best opportunity to buy on a major dip this year, with gold now trading well above its 200-week moving average of $550/oz.", Craig Smith reports. (see chart)

Smith advises:"Investors must decide what type of market they're really in. If it's a BEAR market, you sell the rallies. If it's a BULL market, you pick a price and buy. If there are dips, you buy more and hold on. WE'RE CLEARLY IN A LONG-TERM BULL MARKET IN COMMODITIES AND COLLECTIBLES. That's why it is incumbent on long-term investors to stay the course and buy every opportunity that presents itself".

"We're in a back-and-fill period right now. I think we have seen the worst of the selling in gold. Though I can't definitively say it's over, most of the weak, vulnerable hands are out", said last Friday's WSJ.

"The current correction is going to end up (as) the last great buying opportunity in what remains the greatest secular bull market in gold's history." says Peter Grandich, in his latest Grandich Letter.

Skepticism among investors over the ability of the Fed to curb inflation may end gold's price correction by enhancing its appeal as a hedge against rising consumer prices, according to a Bloomberg survey.

Precious metals generally rise on higher inflation concerns, but lately the metals have been consolidating since their recent price peak. Gold prices appear to be reacting more to dollar strength, or weakness, than to a rising cost of living which threatens to weaken U.S. consumer spending, the world's #1 economic driver.

"Many analysts incorrectly state that rising rates strengthen the dollar and make gold go down. This is true in a stable and strong economy. The US economy is a pyramid standing on its point. It is stable while no one knocks it over! Trillions of dollars have been created over the last 24 years which have not had an inflationary impact because they have been hoarded as the world�s reserve currency, or been used to purchase treasuries, which was the principle driver of the declining rate trend. As these dollars are dishoarded the inflationary effects will be like a Tsunami" says Adrian Douglas at Lemetropolecafe.com.

"The resulting rise in interest rates will always be behind the curve. They will not be high enough to encourage net dollar buying; they will be high enough only to slow down the dollar dishoarding. A portion of the funds seeking refuge from the declining dollar will go into precious metals."

"Rising rates do NOT prevent a gold bull market, on the contrary, they are entirely consistent with runaway inflation which is conducive to funds seeking out the only real money in the world: GOLD. It can be seen from the chart above that in the last great gold bull market the yield on the 10-Year went from 6% in 1971 to 15% in 1981.", Mr. Douglas concludes.


More Market News...
"Stocks wound down what has been a rocky second quarter for investors on a lackluster note Friday. The Dow (down 9.59 to 11,181.21), the broader S&P 500 index (down 0.50 to 1,272.37) and the Nasdaq composite (down 2.14 to 2,172.24) all finished the session slightly lower on the last business day of the quarter. The Nasdaq tumbled 7.1 percent during the second quarter, while the S&P 500 lost 1.8 percent. The Dow finished the quarter up 0.5 percent." reports CNNMoney

Crude-oil futures surged higher Friday after the Energy Department reported the biggest weekly decline in crude inventories since late November and the first fall in gasoline supplies in nine weeks. Crude was last up $.40 to $73.92.

The dollar tumbled to three-week lows against the euro and the yen Friday after key inflation reports and yesterday's Federal Reserve statement suggested that the central bank is closer to bringing its monetary tightening campaign to an end. The euro ended the week at $1.2785, up sharply from $1.2647 Thursday. The dollar closed at �114.46, down from �115.07 in the previous session.

"Central bankers temporarily boosted the in-credible shrinking U.S. dollar, but we must look closely at the fundamentals for clues as to where the markets will go in the future", says Craig Smith.

"The devaluation of the dollar isn't something that happens on a particular day. It is something that happens every day. In the last 50 years, the dollar has lost 86 percent of its purchasing power, reflecting an annual inflation rate of 4 percent", says Scott Burns in Dallas Morning News.

"Fundamental considerations are aligned against the U.S. dollar and this will prevent sentiment from improving in the days ahead," said Marc Chandler, senior currency strategist at Brown Brothers Harriman.

Fed officials recently reignited concern that government data may be underplaying inflation and the central bank will need to keep raising interest rates. Inflation on the consumer level took another sizable .4% increase in May, pushed higher by soaring gasoline prices.

"The Fed is clearly backed up against the wall. If they raise rates to shore up the dollar, the stock market and housing will take a hit. If they lower or keep rates at current levels, inflation will continue to show up", says Craig R. Smith, CEO of Swiss America.

"With inflation still a tough problem even as the economy slows (stagflation, it's called), the Fed chairman will have to concentrate his efforts more on protecting the U.S. dollar's value by talking tough than by babying Wall Street. That's why the existence of the Plunge Protection Team deserves a big cheer", opines John Crudele in NY Post.


Gold's Next Move?
The United States Mint has released its first ever 24-karat (.9999 fine) gold coins last week, The American Buffalo struck at the U.S. Mint at West Point. In addition to the bullion coin version, Mint-State 69 and high-relief, mirror-finish versions, known as a proof, will also be minted for collectors.

While many pundits see the recent precious metal price correction as a healthy and normal bull market pullback, others are calling it the end of the bull market.

We agree with Daily Reckoning's Bill Bonner market axiom:"It is a weak bull market that does not have strong corrections."

Merrill Lynch last week raised its 2006 gold price forecast to $650 an ounce from $525, and raised its 2007 outlook to $675 an ounce from $500 an ounce.

"Positive drivers for gold include potential inflationary pressures in the U.S., heightened geopolitical risk (Iran and South America), the Merrill Lynch FX team's forecast for a weaker U.S. dollar, continued de-hedging and lower central bank sales," said analyst Jason Fairclough to MW last Friday.

"A concerted intervention by central banks has temporarily depressed the gold market..." reports LeMetropole.com editor and GATA.org founder Bill Murphy. "...providing an excellent buying opportunity for those who missed the recent gold rally. But this savage price fluctuation has highlighted the volatility of gold and its dangers for traders who decide to do more than buy and hold."

"Another very clear reason to believe that the gold rally has corrected and not gone into a bear market is that the obvious signs of a runaway bull market are not yet in evidence. This is a market traded by central banks and a few professional investors, and has yet to attract a rush of mass rush of investors", reports Ameinfo.

"Larry Kudlow recently said on CNBC 'this is the end,' while James Turk told CBS Marketwatch this price correction is normal and he still sees $850/oz. gold by years end. Mr. Turk told Barrons on May 29th that 'gold could go as high as $8,000.oz.'", said Craig R. Smith.

So, what's next in the great commodity and collectible boom of the 21st century? Will gold coins emerge as the "Super" smart investment of 2006 again?

Your editor's best guess and advice: Hold on tight to core precious metal and investment-grade coin positions and aggressively buy the dips, thus cost-dollar averaging for greater long-term growth. 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!

"Rare coins are easy to store and can be a good long-term investment if chosen wisely. The market has gone up and down, but this is one of the most classic and classy areas in which to hunt for treasure", reported the UK's Sunday Mirror on June 11th.

Robert Kiyosaki, best known for his "Rich Dad" series of books, has been investing in gold since 1972 and said he thinks it is still a good investment. "I still think gold will go to $1,500 an ounce. I'm betting against the U.S. dollar. Gold is a hedge against U.S. government mismanagement," said Kiyosaki, adding that his family members have a tradition of saving all their spare change for months on end and then trading all the coins in for a single gold coin.

"Gold and silver bullion will now probably trade in an erratic pattern for the remainder of the summer. Meaningful new cycle highs for gold and silver are not likely until this fall. Year end prices for both though will be exciting," says Ned Schmidt's May 20, 2006 Trading Thoughts from THE VALUE VIEW GOLD REPORT.

"We were overdue for a healthy 10-15% correction. 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]

"Many oil producing nations are getting tired of exchanging what is perceived to be a 'precious diminishing commodity', oil for a not-so-precious multiplying commodity, the U.S. dollar. These counties are getting rich. We are sending $2.5 billion per day to OPEC! It's not just the price at the pump that is affected by rising oil; major corporations like UPS, Fed Ex trucks garbage trucks, etc., must eventually pass on the price of rising fuel which mean higher inflation", says Mr. Smith in his book, Black Gold Stranglehold.

"As odd as it may sound, we should �hope� that the present metals correction lasts a few months or longer! For if gold shortly renews its skyward assault, we will likely experience a price explosion... gold could easily surpass $1000 in the relatively short term", says Dr. Richard Appel in his June Financial Insights newsletter.

"The fact that in today�s world a pure and simple means of exchange [any paper currency] is accepted as payment for goods delivered and services rendered, denotes an intellectual and moral collapse on a world scale. From remotest antiquity, only gold and silver combined in themselves, both functions: the function of means of exchange and the function of means of payment",says Hugo Salinas Price in his latest article "Calling a horse a cow, doesn't make it a cow"

"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.

"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.


SPECIAL FREE OFFER from Swiss America CEO, Craig R. Smith: "Today, experts are calling for gold to hit $1,000, $2,000, even $6,000 an ounce! The GOOD news: It's NOT too late, gold is STILL a bargain! Five years ago my book, REDISCOVERING GOLD IN THE 21ST CENTURY: The Complete Guide to the Next Gold Rush announced the start of a new GOLD RUSH. If YOU want to UNDERSTAND GOLD -- before it hits four-digits, call NOW for my book, dvd and latest newsletter, "THE RULE OF GOLD" at 800-289-2646. Discover WHY Gold Rules!" My Free Gold Rush Kit!
RECENTLY ARCHIVED NEWS (...you may have missed)
New Featured Commentaries
Inflation, Deflation, or Bust!
6-30-06 -- By Bill Bonner, Daily Reckoning -- Concerning the US economy, and by implication the entire world, there are two major currents of thought. There are, on the one hand, those who believe in the perfection of man and those who don't. The first group thinks the science of central banking has made amazing strides. In the 1980s, the Volcker Fed learned that it could tame inflation. Then, 20 years later, the Greenspan Fed found that it could avoid deflation too. "Liquidity" is an economist's word for more cash and credit. "Inflation" is the word used to describe what happens to a currency when too much liquidity is made available...
Golden Opportunites
6-23-06 -- By Mary Anne & Pamela Aden (adenforecast.com)..."This [bull market in gold] is a major, mega-trend and it's going to take time, so don't get discouraged or impatient. As long as this major bull market stays in force, plan to stay on board and we think you'll be glad you did. Basically, there are six major factors driving this bull market: 1. too much spending, 2. too much money is being produced, 3. inflation, 4. the weak U.S. dollar, 5. international tensions and 6. China's growth and ongoing demand for commodities, which is coinciding with a new upmove in the 200-year commodity cycle." ...
Metals Pullback, Relax!
6-14-06 -- End the the bull market in gold... or just a bumpy bull ride? -- By Craig R. Smith, CEO Swiss America -- Gold prices have corrected 29%, as of today, since peaking at $725/oz. on May 9th -- but remains up 9% ytd! While many pundits see today's dramatic fall in precious metal prices as a healthy and normal strong bull market correction, others are calling it the end of the bull market. Which is it? ... I'm glad to see 'hot money' leave the metals...
NOTHING HAS CHANGED...
6-13-06 -- Yet some "gurus" say the gold bull market is over?! -- By Pat Mershon, Sr. Bullion Trader, SAPS -- Why did gold prices fall over 7% in one day? My guess is some very large precious metal producers have resumed hedging. This either sets up a great buying opportunity, or a state of massive confusion...

"In Coins We Trust"
5-26-06 -- By David Bradshaw, IFN -- Tangible commodities and high quality collectible investments are on track to outperform intangible investments like stocks, bonds and CDs again in 2006, just like they have every year since 2001! Gold and silver coins offer the missing link in all paper currencies: a "benchmark" store of value. The U.S. dollar is slowly but steadily sliding into oblivion , taking with it the hopes and dreams of all Americans -- along with the value of their savings account or investments. It is no longer a benchmark of anything, except the public's faith in government (which is evaporating daily)!


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) 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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