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Will awareness of fiat currency devaluation soon initiate a major rally in bullion?

*Dow Theory Letters, by Richard Russell, November 30, 2009

”Gold may need a rest — it’s been higher on 17 of the last 20 sessions.  Analysts are still watching supply-demand equations for gold, hoping that this will give them hints as to where gold is going. In
doing so, they are treating gold just like any other commodity – like copper or zinc.  Wrong; gold is money and a safe haven alternative to fiat money. No wonder the Fed and the central banks fear and despise gold. When gold rises, as it’s been doing, it tells us that the world distrusts fiat money, and that people are turning in their central-bank created ‘junk money’ for the real thing, time-honored true wealth better known as gold.

Interestingly, the US Mint recently announced that it is suspending the sale of American Eagle one-ounce bullion coins. Why? Because the Mint is sold out. But no problem, Canadian Maple Leafs and South African Krugerrand are still available. Latest — now I hear the mint is selling Eagles again.

What we are really watching is the beginning of the death-struggle of fiat paper. We see it in the rise of gold bullion and we see it as Congressmen suddenly develop the courage to attack Ben S. Bernanke and the Fed. Where our cowardly politicians once bowed at the feet of that ego-driven little twerp, Alan Greenspan, some Congressmen are now openly attacking Chairman Bernanke and the very existence of the Federal Reserve.

Leading the ‘get rid of the Fed’ movement is Texas Congressman Ron Paul. Ron has been called ‘eccentric’ because of his insistence that the nation adhere to the dictates of the Constitution of the United States.  So it’s come to that — you’re considered to be a kook if you believe that the nation should abide by its own US Constitution.

Gold — One of the greatest and least-heralded bull markets in history continues to work its way higher. Below I have posted the year end gold prices over the last nine years. Gold is now above 1100 per ounces and if it closes the month of December near 1000, the year 2009 will add a new high close to this amazing and unrecognized bull market.

I have studied bull markets ever since the 1940s. And I’ve lived through quite few of them. I’ve never seen a big bull market, such as the current gold bull market, end without a speculative third phase. Gold is now (finally) receiving national and international attention. This is a prerequisite for a third phase explosion.

Question — Russell, when do you expect the third phase of the gold bull market to start?

Answer — What you’re really asking me is ‘When will the panic to get out of fiat money begin in earnest?’  I can’t give you the exact day, but when central banks trade their own money in for gold (which some are now doing), I can tell you that we’re getting close.

Last day of the year quotes (spot gold).

2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438.40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — $889.00”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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