Gold set a new closing high Wednesday, March 23rd, 2011 at 1,437 (after hitting an intraday high March 7th at 1,444), and Silver set a new multi-decade high both intraday, 37.36, and on a closing basis 37.33. We got a new buy signal in our HUI Mining Stocks key indicators, and added to our positions in these precious metals investments in our Conservative Portfolio Wednesday. We believe Gold, Silver and the HUI are about to start another powerful rally leg for several fundamental reasons, all supported by the technicals. World political unrest, uncertainties about future energy sources, the devaluation of the U.S. Dollar, and hyperinflation debasing fiat currencies, and pushing up energy and food will drive precious metals sharply higher over the next two years, a safehaven for savings and investment. Eventual (may take several years) upside targets are at least $3,000 in Gold and $70 in Silver. The HUI should benefit from the rise in these metals, however declining stocks will dampen the upside potential for the Mining stocks. The HUI's rise may only be half the rise in precious metals. We bought Gold in our Conservative Portfolio at 576.50 and Silver at 13.77 in 2006 and 2007, have held these positions, and have added to them periodically as the rally has unfolded. It is time to buy more, so we have.
It is also time to get real. The fact is, we are now in a housing market depression. Almost every economic recovery in this nation's history has been started part and parcel with a recovery in the housing industry. That is not happening at this time. Just the opposite, Housing is disintegrating into the Great Housing Depression. Check out these numbers: First of all, housing prices have fallen 26 percent since their peak a few years ago, the largest price decline ever in our nation, worse than what occurred during the Great Depression of the 1930's. We just learned this week that New Home Sales fell 17 percent month over month in February 2011 versus January 2011. The gross number of New Home Sales in February 2011 annualizes to 250,000, which is the worst on record, ever. This number is less than half the number of sales in 1963, which saw 560,000 New Home sales -- but with 120 million fewer people then than now live in the U.S. Think about that. February's number is abysmal. Families dependent upon the Housing Industry are headed for economic ruination. The construction industry is going to see a ton of small builders go belly up. When we consider the February 250,000 sales figure, we need to understand that 700,000 annual sales is normal for a healthy economy. Up to this point, the worst sales year ever still had 323,000 New Home sales. This February's figure is dreadful. Banks have tightened lending standards, making it so difficult to qualify for a mortgage that a third of all sales are now 100 percent cash deals. In other words, a third of all sales are occurring without a bank. Collateral values are sinking. Short sales are rising. Foreclosures are a predominant percentage of current sales. This is a spiraling black hole of coming economic devastation, a contagion that will spread throughout the entire economy (except of course the protected Wall Street folks, who get to enjoy the Fed's fraud on America, taking all the liquidity the Fed can print and trading markets with the printed cash for self-gain, a corruption right up there with Nero fiddling while Rome burned). Existing Home Sales were no better, falling 10 percent in February, with prices plunging on existing homes that get sold. All the above will contribute toward significant increases in the value of precious metals as folks flock to a financial instrument that has no counterparty, is real and physical, and not subject to corporate mismanagement.
There is so much debt being created globally, that it will never be paid back in currencies that presently exist. At some point, precious metals will have to back a new global currency at an exchange rate so high that debts in current fiat paper can be cancelled. In other words, the final solution will be to create a value for gold, perhaps by Federal Reserve, Treasury Department, or even G-20 Nation edict, at some ridiculous number, say $10,000 an ounce, backing a new currency at this exchange rate, then calling in all former currencies in exchange for a fraction of the new currency (similar to a reverse stock split) since former currencies will be essentially worthless. Under this scenario, debts are essentially repudiated, instead of paid back.
The point: Gold and Silver will rise sharply over the coming years. Today's prices will look cheap in hindsight. This should be a buy and forget about it investment.
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"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."
John 6: 35, 38, 40