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Leeb - Sense of Desperation, But Gold Ready to Stampede

With gold, silver, oil and stocks all moving higher to start 2012, today King World News interviewed acclaimed money manager Stephen Leeb, Chairman & Chief Investment Officer of Leeb Capital Management. KWN wanted to get his take on where gold and silver are headed and also his thoughts on increasing crime. When asked about the recent strength in gold, Leeb responded, “Yeah, Eric, this is a big break from last year. Gold has shown, through the last ten or twelve years, that it’s in an uptrend regardless of what happens. But, at least toward the end of last year, there was an inverse relationship between the dollar and gold. The dollar up, gold down big. The dollar down, gold up a little. That’s really changed in the first three trading days of 2012.”

Stephen Leeb continues:

“The year started with the dollar down the first day and gold had a very big up-move. The last two days the euro has been clobbered and the dollar has been very strong and (yet) gold has continued to rise. That, to me, is a very, very good sign. Historically, when gold breaks away from other things, when it starts acting on its own, that tends to be a very positive sign.

There are no promises when it comes to any market, but the last time we saw this kind of action in gold was in 2008. Gold, initially, broke away on the downside, diverged, and gold starting going up. Then, all of the sudden, gold exploded and once it exploded it did not look back....

Continue reading the Stephen Leeb interview below...

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“So, what I conclude from this is the weakness that we saw in gold was weakness related to liquidity concerns coming out of Europe. Whenever you saw the euro go down, last year, those liquidity concerns picked up and gold got clobbered. This year, for whatever reason, maybe because the ECB balance sheet has gone to $3.5 trillion, the liquidity concerns have kind of dried up a little bit. (Now) you see what gold is capable of.

My feeling is, once we get rid of these liquidity concerns, you are going to see a fantastic move in gold. I still hold to my belief that gold could finish this year around $3,000. Bill Gross said it yesterday, ‘The world faces two cancerous growths, one, deflation, zero interest rates, the other inflation.’ Between those two, Eric, I think you have to go for inflation or you are going to have so much social unrest.

These are our choices, we either go for inflation or deflation. I’m betting inflation, but even if it’s deflation you are still going to have gold as a very big winner.”

When asked about the dramatic increase in crime being seen in Europe and the United States, Leeb replied, “High commodity prices are, in a sense, inflationary, but ultimately the rising cost of living is translating into a deflationary event for an ever greater portion of the populace.

The bottom 20% in this country, right now, pays over 50% of their income on food and energy. That 20% (figure) is likely to move up to 30%, so you are almost forcing people to steal. People just don’t have the money. I mean there’s a sense of desperation here, Eric, that you feel. It’s associated with lower real wages (and unemployment)...and these high commodity prices will dramatically accentuate social distress in this world.”

The KWN Stephen Leeb interview is available now and you can listen to it by CLICKING HERE.