2006: WHY GOLD RULES

1-2-05 "Golden Minute" -- "GOLD: A luxury you can't afford to be without in 2006" - LISTEN

Gold rose over 18 percent in 2005, closing at $517.40 an ounce last Friday, 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. Silver rocketed 36 percent!

Last year, millions of prudent investors worldwide came to the same conclusion: a portfolio without gold was a luxury they could no longer afford. The markets and Swiss America will reopen Tuesday.

"The outlook for the new year would remain bullish, gaining support from positive technical and fundamental factors, such as strong global jewelry demand and increased investor interest of diversifying into commodities as an alternative asset class," Standard Bank reports.

"Can anything be as mesmerizing as gold?" asks Barron's in "Golden Opportunity?" on 12/26/05. "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."

U.S. stocks traded broadly lower on the last session of 2005, with the Dow taking its first yearly loss since 2002. Investors continued to be unnerved by the inversion in the Treasury yield curve. Stocks began falling Tuesday after a phenomenon in the Treasury market called an `inverted yield curve' touched off concern economic growth may slow in 2006. When 2-year notes yield more than 10-year notes it typically foreshadows a noticeable downturn in the economy and, usually, a recession. With an inverted yield curve, banks can no longer make money by borrowing short-term money and lending it at longer terms.

According to Rediscovering Gold in the 21st Century author/CEO Craig R. Smith, "After slowly, but steadily doubling in price over the last 5 years, GOLD is now is moving up quickly because it's entered a NEW phase. Four years ago (when gold was $265 an ounce) my book announced the start of today's gold rush. Since then, gold prices have nearly doubled. In the next few years I see gold doubling again -- to over $1,000 an ounce!"

"Gold is up over 100% since 2001, rising 18% in 2005! But gold is still cheap if you consider it's true relationship to the falling value of the U.S. dollar over the last 25 years. Gold's price peak in 1980 was $850 an ounce then, but using official government inflation-adjusted numbers the same peak would be at least $1,800 an ounce today! So, gold at $500 is still a 'golden' buying opportunity! 'Follow the money' and you'll discover why tangible assets like gold are the best investment of the new century," says Mr. Smith.

The recent metals rally shows no signs of running out of steam amid solid demand as higher energy prices fuel inflation concerns. Investors and funds are finally re-allocating assets out of stocks and bonds and into gold.

"The U.S. rare coin market continues to hold steady this holiday season. 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. This pullback in spot gold is EXACTLY what they were looking for to get started", says Tom Rodriguez, Sr. broker at Swiss America.

Last week, MoneyCentral editor Jon Markman explained to readers "Why gold is gleaming again" ... "Among most investors, the ascent of gold to levels not seen since the Reagan administration has been a big yawn. The ore is widely considered an artifact of another era, a crock at the end of their grandpa's rainbow."

Mr. Markman continued, "If gold goes much higher, though, it's going to start making the nightly news, and maybe even the cover of a news magazine. Then it will begin to dawn on equity investors that something really important is happening, and that it might just be worth the effort to branch out from the straightforward earnings-and-economics world of stocks and into the supply-and-monetary policy world of precious-metals trading."

"Something truly wonderful is happening in gold worldwide as it breaks out concurrently everywhere. This is the single most important development in this entire gold bull to date. Gold is decoupling from the dollar that has long oppressed it with dazzling speed, and entering Stage Two of its bull market," says LeMetropole Cafe contributor Adam Hamilton, of ZealLLC.com (Adam has excellent charts showing gold's rise in virtually all currencies since 2001).

"Gold's recent fall serves as a timely reminder that nothing, especially not gold, rises in a straight line", says Alec Hogg at Mineweb.com. "A longer-term chart of the bullion price suggests a pull back to the $470 level is possible before the next wave hits. Since the Bull Market started in mid 2001, the gold price 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)."

"Last year 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 before the easing experienced during the last few trading sessions."

"All of this suggests the four year long Bull Market is intact. But given the recent price action and the seasonally quiet period, gold bugs might need to exercise some patience."

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

The "recycling of petro dollars into gold as a form of money, and strength in demand for gold jewelry in India, will drive prices to $650 in 2006" said Frank Holmes, chief investment officer at U.S. Global Investors.

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.

Our friend and broadcaster, Tom O'Brien reports to Forbes.com, "By most fundamental as well as technical accounts, gold will make it through this short-term pullback and continue its price ascension." He encourages readers to "Discover Gold Again". We agree!

Gold has rallied sharply in recent months, amid robust demand for jewelery in China and India, buying by central banks, notably Russia, and inflation concerns that have been fueled by a surge in energy prices. Gold's bullish pattern of higher lows and higher highs is attracting more momentum-based buying.

Buying gold under $240 an ounce?

Using the Fed Inflation calculator, the recent high in gold of $540.00 '2005 dollars' today equates to just $252.00 "1981 dollars". So, for gold to reach 850 1981 dollars again, it would have to top $1,819.00 in 2005 dollars -- adjusting for "official" government inflation statistics! (see chart)

A growing number of analysts now agree the technicals, fundamentals, and market sentiment are all in alignment to continue driving gold prices upward. Little wonder why Squawkbox co-host Bob Kernan said last Tuesday, "I'm petrified of gold" referencing the overall effect rocketing gold prices will have on the financial markets.

"People are trying to get gold into their portfolios by the end of the year," said Zach Liggett, a fund manager at Financial & Investment Management Group. "If you're not making any returns on your safe-haven money, why not park it in gold?" reports Bloomberg.

"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."

Major funds as well as individual investors are seeking alternatives to stocks and instead are buying up precious metals -- despite tamer inflation numbers, lower oil prices and a firmer dollar.

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."