Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

*** Gold related post ***

Thanks to SI's ralph-emerson......

The Grandich Letter

SPECIAL ALERT:
GOLD UPDATE

Wednesday, April 14, 2004 -
10:10 a.m. EST
Gold: $395

This morning’s release of the latest CPI numbers has caused another downdraft in the price of gold. The thinking is that higher inflation will lead the Fed to tighten, thereby strengthening the U.S. dollar.

This in turn, is bad for gold.

First and foremost, I believe nothing can end up further from the truth. Why? There isn’t an economic book or economist who wouldn’t state that higher inflation is the ultimate negative factor to any currency. Gold bugs should welcome today’s number regardless of the insane reaction-of-the-moment to it.

Perhaps it’s time for gold bugs to dust off their Goldbug 101 book and recall what was the leading factor in the only other great bull market for gold about 25 years ago - high inflation.

I have read some of the gold forums on the Internet and find an almost 180-degree turn in sentiment from this time last year. Numerous posters were pounding their chests about the end of the bull market and were tossing out numbers like $350 or even $300 that gold would see again. To have any negativity in a forum, which is usually totally dominated by bullish believers, strongly suggests to me that much of the over-enthusiasm that has overhung the metals and mining share markets is now gone. I take that as a very bullish sign.

The question one should ask themselves past the emotions of the day is, “Have the factors you believed that could raise gold to $500 or more changed for the worse?” My answer is a resounding, “No.” Higher inflation numbers can only weaken the U.S. dollar over time. It can never be a good thing long term.

America has been robbing Peter to pay Paul via an orgy of cheap credit and not worrying if one can afford their purchase, but rather if one can just make the payment. Higher inflation can only lead to higher interest rates. Such a result can and will have devastating effects on the economy, which in turn, can only be beneficial to gold over time.

Yours truly welcomes today’s action with open arms.

"Insanity in individuals is something rare but in groups,
parties, nations and epochs it is the rule."
Fredrich Nietzsche,
German Philosopher

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=20023064