Experts Predict News Record Highs for Gold By Pat Heller, Market
September 23, 2008
In the past week or so, the spot prices of gold
and silver have risen more than 20 percent and 25 percent,
respectively, from their recent lows. The prices of gold and
silver bullion-priced products have gone up by even higher
percentages as buyers scrambled to purchase any coins or ingots
they could find.
Why the rush?
Simple. Since the U.S. government bailout of Fannie Mae and
Freddie Mac just over two weeks ago, global financial markets
have seen their greatest turmoil at least since the Great
Depression. The largest U.S. banks, brokerage firms and insurance
companies were on the brink of collapse or had filed for bankruptcy.
Since the beginning of last week, the U.S. government has
taken several increasingly desperate steps to seize control
of the U.S. economy. Bailouts were coming so fast and furious
that the Federal Reserve ran out of resources and had to seek
loans from the U.S. Treasury. Finally, even the U.S. Treasury
ran out of immediate cash and had to beg $180 billion from
other central banks to try to manage the liquidity crisis.
As a result, the U.S. government has not only taken over
the two largest mortgage companies in the U.S. (Fannie Mae
and Freddie Mac) it also has the option to take over AIG,
the largest American insurance company. Late last week, the
government announced that it will reimburse banks and financial
firms for their bad debts and guarantee the assets of money
market funds. These last two pronouncements have a potential
cost to taxpayers, as admitted by the government, of as much
as $750 billion. Typically, such statements of cost to the
taxpayers turn out to be a tiny fraction of eventual cost,
so expect the eventual tab to come to double or quadruple
the quoted figures.
The legislation for absorbing the bad debts is currently
in Congress. I have reviewed an early draft. It grants virtual
dictatorial powers to the Secretary of the Treasury in interpreting
and implementing the law. It also includes a section that
explicitly prohibits other government agencies or courts of
law from overruling the Secretary of the Treasury's judgment.
In effect, the U.S. government is in the process of nationalizing
major parts of the U.S. economy.
The only way that the U.S. government can practically afford
all these burdens is through massive inflation of the money
supply. Foreign governments and investors understand this.
They are intelligent enough that they have already started
to ramp up efforts to dump U.S. dollars and dollar-denominated
In place of the U.S. dollars, both American and foreign investors
are seeking assets denominated in other currencies and - gold
One report said that until a few weeks ago, only about 2
million ounces of silver had been imported into India so far
in 2008. However, in just the past few weeks silver imports
were well over 30 million ounces.
European buyers have had so much difficulty locating any
physical gold to purchase on their continent that they are
blitzing American dealers to see if they have any product
to purchase. In my judgment, this is it and it is now.
Gold and silver prices will be extremely volatile in the
coming days, but I expect to see new record highs for gold
and the highest prices for silver since January 1980 (ignoring
inflation) within the next few weeks. If the politicians manage
to hold down prices through the U.S. elections in early November,
we may not reach record levels until later this year or by
spring of 2009 at the very latest.
Last week, the price of gold experienced its largest one-day
jump in price ever. Silver also enjoyed one of its largest
ever price increases since 1980. Such large movements tell
me that the trading partners working with the U.S. government
to suppress precious metals prices have been so busy simply
trying to survive that they no longer have the assets or personnel
to hold down gold and silver prices.
Even a report released last Wednesday by John H. Hill and
Graham Wark, metals analysts for Citigroup, stated, "Frankly,
we're surprised that gold is not already at $2,000 per ounce."
If such mainstream analysts expect the price of gold to double,
that is almost a sure sign that the floodgates are about to
give - real soon!