Why add to precious metals positions after the recent price corrections?
"The world banking system is broken and badly needs to be re capitalized. How will they get new capital from investors? We doubt that the banks will be able to get many investors to buy into their optimism and buy their stock. In our opinion, the only long term solution is that governments print more money to re-capitalize and re-liquefy the banking system. The season for increased gold demand is upon us as India starts to buy more for the wedding season. Gold coins are in short supply at many coin dealers in the U.S. Stagflation, inflation, and deflation threaten the world in different parts of the globe. All of these events are bullish for gold and we are adding to our gold positions.
As we said earlier we are not technicians, or momentum players (the two groups that seem to have had control of commodity prices during the last few weeks). We are fundamentalists, and the fundamentals argue that food and precious metals are getting into attractive buy areas.
We do not know if this is the ultimate bottom in precious metals. We do know that we want to own gold during periods when the world banking system is flirting with collapse and the only solution is governmental takeovers and subsequent large money printing exercises, by governments in Europe, Japan and the U.S.
There has been no fundamental decrease in the value of gold as a hedge against both inflation and strong deflation. Clearly, many commentators believe that one or the other may be the long-term outcome. We believe it is still too early to call…but that inflation has the upper hand at this time. Historically, gold has fared well in both inflationary and strong deflationary periods."