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By Ronald-Peter Stoferle, Incrementum AG Lichtenstein

Here Is The Surprising Reason Gold Is Soaring Again Today


October 24 (King World News)


It seems that consensus currently assumes that the gold bull market has ended.  However, we are of the opinion that the fundamental case to own gold continues to be intact, more than ever.  It seems that the correction which has been in train since September 2011 exhibits strong very similarities to the mid-cycle correction of 1974 to 1976.  That period is similar to the current one specifically because of marked disinflation, rising real interest rates and extremely high pessimism regarding investment in gold....


Continue reading the Ronald Stoferle piece below...




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Tom Fitzpatrick recently quoted an article which stated the following:


“Two years ago gold bugs ran wild as the price of gold rose nearly six times.  But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight.  The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.  The rout says a lot about consumer confidence in the worldwide recovery.  The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.  Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course.  The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.”


We would assume that this view was released only recently.  However, it was written in the New York Times on 29 August 1976 (!!), only 2 days after gold hit it’s corrective low (see chart below comparing today’s action vs 1970s). 




The fact that the current correction is rather insignificant in a long-term context becomes clear when contemplating the following chart of annual average prices.




Now that gold and especially gold stocks are trading significantly below their peak levels, we see sell-side analysts – in typical pro-cyclical manner – constantly decreasing their price targets and cutting their earnings expectations for miners.  This classical herding behavior is often a reliable buy signal.  While analysts are becoming increasingly bearish, company insiders are becoming increasingly bullish.  According to INK Research, insider buying has recently reached a new all-time high.  The last time this happened was in October of 2008, close to the bottom in gold mining stocks.


Therefore, from a sentiment perspective, gold and especially gold mining stocks are probably “the ultimate contrarian play” at the moment.  This is what we like to buy at heavily depressed prices. 


© 2013 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.


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The audio interviews with Michael Pento, Eric Sprott, Grant Williams, Rob Arnott, Andrew Maguire, Art Cashin, Egon von Greyerz, Bill Fleckenstein, David Stockman, Robin Griffiths, Jim Grant and William Kaye are available now. Other recent KWN interviews include Marc Faber and Felix Zulauf to listen CLICKING HERE.


© 2013 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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