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Rick Rule continues:


“That was also a volatile market.  In 1975 you had a raise in interest rates which led to a stronger dollar and weaker gold prices.  And in the midst of the biggest gold bull market of all-time, in 1975 the gold price fell from about $200 an ounce to $100 an ounce.  So speculators who had the overall theme right, an advance in the price of gold, but who didn’t have the financial and psychological stability to stay in the market, lost a lot of money if they panicked out of the market during that decline. 


For speculators who were shaken out in the bottom end of that range, they missed an 8.5 fold increase in the price of gold.  The lesson, of course, is in secular bull markets you can have extraordinary cyclical declines and you have to have the faith to stay in the trade....


Continue reading the Rick Rule interview below...




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“There are, however, similarities worth noting.  One is the 70s featured Lyndon Johnson’s guns and butter program, which is a different way of saying profligate government spending and deficit financing.


Lyndon Johnson’s guns and butter had to do with maintaining the Viet Nam War, while at the same time maintaining very higher domestic social spending.  This is along the lines of our continued Middle-East conflicts and very high social spending.  


The one-two punch of guns and butter and social spending kicked off a significant round of inflation, which is eerily similar to today.  We also saw a broad advance in natural resources, in the 70s, as a consequence of two decades of underinvestment.  This is also very similar to today.


I suspect the other thing that argues in favor of gold doing well is the demand for gold is much more diverse now.  In the 1970s market the demand for gold was largely from citizens of Western developed nations.  You didn’t have the availability of gold distribution to societies that have traditionally looked favorably on gold, in particular East Asian and South Asian societies.  This encompasses India and China and it could well be that in the intermediate-term there will be more strength in the bullion market because of continued retail buying in India and China.”


Rule also had this to say about how this will end: “It is my belief today that we have a chance to go substantially higher in the gold market.  In the 70s the world economies were in better condition to deal with the stresses they experienced in the late 1970s than they are today.  And as a consequence of heading into serious difficulties, with weakened national balance sheets, the potential for an upside blowout in the metals price is stronger now than it was in the 1970s.


Given that the world economic condition is far more precarious now than it was at the end of the 1970s, the response by fiat currencies to black swans or asymptomatic shocks could very well be much more dramatic.  Because of this it’s possible that you will see more dramatic upside moves in both gold and silver than what we witnessed in the decade of the 70s.” 


To read the last KWN interview with Rick Rule titled, “Gold, Silver, Takeovers & 2,000% Gains” CLICK HERE. 


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


Eric King

KingWorldNews.com

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