The Russians and others are calling for the US dollar to be replaced by a basket world currency less dependent on the mighty dollar. The BIG G20 meeting in London this week will likely see these demands come center stage and could lead to some strength in the Gold market. Last week Gold was under pressure with profit takers and was down 3.2% for the week. As you have heard the Russians have clearly stated their aim to return to a partial Gold Standard which they believe will return some stability to the international monetary and financial system.
I am liking this area down to POG 880 for averaging in. The demand for Gold is at an all-time high around the world and there’s really no way to artificially grow the supply of Gold. In my opinion large institutional investors and hedge funds will be looking to reestablish their positions in Gold stocks including the junior miners. A few of my favorites in this area are (AUY), (GSS), (KGC), (ABX) and if you want to play an ETF the (GDX). BIG government spending is flooding the entire world with trillions of dollars that didn’t exist just one year ago. When the deflation ends, hyperinflation is going to begin and when that happens, gold should rebound to new highs.
As gold surges higher, this trend should continue. (see chart below) Gold stocks’ future earnings potential in a gold bull market are huge. In addition Gold miners are not only reasonable today in P/E terms, but very cheap relative to the POG. As the chart indicates 880 is support and is key. If we break below that all bets are off but I am looking for Gold to continue in the channel and head up to new highs as we move through spring into summer.
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“The statement that “We are on a Road to Hell” did in fact state the position of the G20 even if cloaked in plausible deniability. The Hell in this statement is a worldwide Weimar if the G 20 was to do what the Obama Administration’s finance guys wished for. America is headed to this Weimar Hell, but only North Americans seem not to know it. Being on this road that now has “no exit,” Gold becomes your lifeline. I mean this literally. It is your LIFEline” By: Jim Sinclair
