Leeb:  “Eric, I am focused on the tremendous volatility we are seeing in major markets, and also in the US government.  Because of the turmoil in the US we are seeing bonds up one day and then down the next.  We also see gold getting hit for no reason and then rallying the next day.

But one of the most interesting things we are seeing right now is the weakness in the US dollar.  The US Dollar Index is now trading below the key psychological level of 80....

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“The important point here is that the last time we had a crisis the dollar went up.  Now the dollar is down vs the euro.  We are seeing so many problems in Europe and yet the euro is strong.  That tells me that there are no strong currencies, expect for maybe the Chinese yuan. 

So there is uncertainty in the currency markets and now we are seeing commodities such as copper starting to get a bid.  Some of the bid for copper is most likely the realization that the Fed is going to have to maintain their bond purchases.  Who knows, the Fed may have to buy the entire federal debt before they are done.  But at a certain point people are going to get fed up with dollars.  What are they going to turn to?  Eventually they are going to turn to gold in a big way.  That’s the only real currency in a situation like this.

Coming back to the US, shutting down the US government is one thing, but defaulting on US sovereign debt is something else entirely.  I don’t think this will happen because the US can print money, but we are moving closer and closer to that edge.

Where I am heading with all of this is investors are asking the question, ‘Why is gold not soaring?  Why is it not at $1,800 or $2,000?’  It’s inevitable that gold is going to those levels.  It’s not a question of whether it gets there, but when it gets there.  My theory right now, and I know this sounds like a conspiracy, but it’s really in none of the players interests to let gold go soaring.  My sources tell me that the Chinese still have another 5,000 tons they want to accumulate.  So they don’t want to buy it at $2,000 or $2,500.

And it’s certainly not in the interest of the West to just let the dollar collapse.  So in this incredibly chaotic environment we have the currency of choice, gold, not doing anything except exhibiting a lot of volatility.  This is probably one time where the Chinese, (the East), and the West are probably on the same side.  But all of this is leading to something totally dynamic.  Everywhere I look I see the seeds of a major move being planted.

The Chinese economy, it turns out their obituary was premature.  Last night the Australians raised their price for iron-ore for next year because the Chinese economy is stronger than anticipated.  So China and the East are doing great.  But turning to the US, we can’t even maintain level unemployment.  Only by virtue of government manipulation of the numbers and people dropping out of the labor market do we have level unemployment.  There are so many discontinuities in this country that I don’t even know where to begin. 

The same thing is true for Europe.  So gold is king right now.  It’s just that the king is waiting behind the curtain.  The curtain is going to be drawn at some point, Eric, and when it’s drawn people are going to see a move unlike anything they have seen in their lives.

In the short-term, if investors want to buy a precious metal, I would buy silver because silver has more upside.  We are seeing increased demand for solar, massive money printing, and this means huge upside for silver.  But for patient investors, they should know that in the future instead of gold trading in the $1,315 area, gold will be trading at $13,150.  There is going to be a spectacular rise in gold, and we are getting closer to that big move as the Chinese begin to accumulate another 5,000 tons of gold.”

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Eric King

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