Gold Bears Out Of Time & About To Pay The Ultimate Price
February 12, 2013
On the heels of news coming out of Russia about their accumulation of gold, today KWN is pleased to present the most powerful case for gold that Michael Pento has ever written. Below is Pento’s piece:
“It isn’t much of a secret that gold mining shares have suffered greatly in the past 18 months. In fact, since the summer of 2011 the Market Vectors Gold Miners ETF (GDX) has plummeted nearly 40%. That has caused many precious metal investors to give up hope on mining shares altogether; and to now anticipate a tremendous plunge in gold prices. Nevertheless, I believe gold and gold mining shares offer investors a great value at this juncture, and this is what I will explain in the following piece.
Interest rates in nominal terms are at record lows and have been promised by the Fed to remain near zero for an indeterminate duration. To highlight this point, Fed Vice Chairman Janet Yellen said in a speech to the AFL-CIO this week that the central bank may hold the benchmark lending rate near zero, even if unemployment and inflation hit its near-term policy targets.
Yellen said the Fed’s objectives of 6.5% on the unemployment rate and a 2.5% inflation rate are merely, “…thresholds for possible action, not triggers that will necessarily prompt an immediate increase” in the FOMC’s target rate. “When one of these thresholds is crossed, action is possible but not assured.” Her statements underscore the fact that the $85 billion per month worth of Fed debt monetization and ZIRP will not end anytime soon.
Since the Fed is NOT anywhere close to raising interest rates or reducing its bond purchases, this should also allay fears that the U.S. dollar is about to enter into a secular bull market. The greenback is just about unchanged on the DXY over the past 12 months, and has been mostly range-bound between 70 and 81 during that timeframe. There isn’t any evidence that the USD is ready to soar in value against our six largest trading partners. Without a new bull market in the U.S. dollar the price of gold cannot enter into a secular bear market….