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World Gold Panic

Written By Luke Burgess

Posted September 25, 2009

With gold trading just under $1,000 and the economy still in flux, it’s never been more important to know what’s happening in the precious metals markets. In fact, more and more readers are asking us for more gold editorial. That’s one of the reasons we’ve decided to bring Gold World — one of our fastest-growing publications — directly to Wealth Daily and you. Each Friday, Gold World editors Luke Burgess and Greg McCoach will publish their unique gold and precious metals insights right here in this letter. I hope you enjoy it.

Profitably yours,
Brian Hicks
Publisher, Wealth Daily


Gold WorldGold is looking to wrap up September with record monthly prices.

The yellow metal has traded over $1,000 an ounce in 12 of the 18 trading days of the month so far. And with only three business days left in September next week, the average monthly price for gold is currently $998 an ounce. This compares to March 2008, when gold prices topped the $1,000 level for the first time in history and averaged $968 for the month.

A new average monthly record is extremely bullish for gold prices right now. It is a sign that the third and final investment mania stage of the gold bull market is in bloom — that’s when gold prices skyrocket.

And while no one knows exactly when the big breakout in gold prices will be, it sure feels like that moment’s getting much closer.

The U.S. dollar is staring at deep trouble and has a real chance of ending up on the heap of failed fiat currencies. The inverse relationship between gold and the dollar is about to become more pronounced over the course of the next 12 months.

This alone could run gold prices to a new record high in the $1,200 to $1,500 range, providing us with an exceptional opportunity to profit and make spectacular gains.

The truth is, gold is going to go much higher — whether Wall Street gets it or not. Gold bull and contrarian author Richard Russell made some interesting observations in his Dow Theory Letters, published in September. Richard wrote:

Somewhere ahead I expect to see a worldwide panic-scramble for gold as it dawns on the world population that they have been hoodwinked by the central banks’ creation of so-called paper wealth.

I have never seen a bull market of this size end without a highly-speculative third phase explosion.

You can’t create wealth out of a computer — you create wealth from the sweat, intelligence and risk- taking of men. Gold comes from a gold mine. A gold mine represents the expenditure of capital, risk-taking, the sweat of hundreds of men — and courage. A gold mine’s product, gold, has represented timeless wealth since Biblical times. No central bank has ever produced a single ounce of gold. Nor has any central bank ever produced a single element of true, sustainable wealth.

In their heart of hearts, men know this. Which is why, in experiment after experiment with fiat money, gold has always turned out to be ‘the last man standing’.

Politicians can threaten gold with forthcoming central bank sales, they can sell gold in quantity, they can smother gold with short sales, but the primary trend of gold will win out. It will be expressed today, in a month or in 2010. The trick for us is to hold onto our position — don’t trade it, don’t move in-and- out with it, don’t hold so much of it that you get the heebie jeebies every time it dips ten dollars. The primary trend of gold is up. We’re riding the bull. The bull will try to shake us off his back. We’ll hang on.

In the past few weeks, I have seen several stories in the news that indicate we’re about to have a big run in gold prices.

First, I just saw that Barrick Gold (NYSE: ABX), the largest gold company in the world, will be covering their hedged gold positions. Barrick is doing a bought deal public offering to raise money to pay off the hedged positions within a year. The company will raise $3 billion to cover these obligations. It’s clear that Barrick made this strategic decision to gain full leverage of rising gold prices.

In other news, Hong Kong has demanded all its gold reserves back from London. The country wants to store its reserves domestically in a new state-of-the-art vault. The Hong Kong Monetary Authority stated that it will also transfer gold reserves stored in other vaults around the world to the depository later this year.

This has massive implications for higher gold prices. If Asian banks start demanding their physical gold, the "paper game" the manipulative crowd has been playing for so long may soon be up in smoke.

Meanwhile, China has put a stop-loss on their derivative losses. That means firms like Goldman Sachs, who knowingly and recklessly sold this derivative garbage, may have to deal with defaults. This could turn out to be a huge development that has a major impact on higher gold prices.

These are just a few of the most recent examples of signs that we’re about to see the next leg upwards in gold prices.

At some point, the pressure that has been building in gold for years will explode in dramatic fashion. Unfortunately, however, it’s impossible to know exactly when this is going to occur.

I continue to recommend staying the course with physical gold. Buy and hold physical gold bullion bars and coins with the lowest premiums. It’s going to be a ride for the record books. Be sure you don’t get left behind.

Good Investing,

Luke Burgess
Managing Editor, Gold World
Investment Director, the Hard Money Millionaire

Editor’s Note:  My colleague Greg McCoach isn’t just a gold ‘insider.’ He’s the real deal. And he’s recently come up with a play that’s already earning readers sizable gains. It’s a property he calls "the greatest gold discovery of the last 50 years." Greg’s prepared a full report on this developing situation, and how the entire mining industry is waiting for drill results to confirm what’s expected to be a homerun play. Click here to read our brand-new findings.