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Ing:  “The gold market has remained weak following the Non-Farm Payroll report, but to me this market action is all just noise.  Here we have the Dow and the S&P reaching new highs, while at the same time commodities are trading at or very near their lows....

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“But people need to stand back and look at the broader events, such as Europe dropping their interest rates, and engaging in another round of the quantitative easing bandwagon.  This has sparked a classic currency war.  We have been concerned about the competitive currency devaluations for some time now.

We’ve had the euro under pressure.  This has caused a brief rally in the US dollar, and of course that has deflated some of the interest in gold.  But these competitive devaluations, as we learned the last time, the ratcheting down of interest rates is something that investors do not like.  Of course this classic reflation is putting yet another underpinning on the gold price. 

The third factor at work is China.  There are still fears of a slowdown, when in fact they have just completed the Third Plenum.  This is where the leaders talked about market reforms and growth.  We have already had a 20% rebound in iron-ore imports in China in the wake of this historic meeting. 

Meaning, we should no longer be worried about a slowdown in China, instead we should be focusing on how much the growth is picking up.  The Chinese also just had their mining conference and the mood in China was completely different than it is here in the West.  They were focused on the coming growth in opportunities in the mining sector. 

So, the stock markets seem to be booming, but we expect that to be temporary.  Commodities are also at their lows, but this divergence is not going to last long.  For investors this is a classic opportunity, just like the Chinese are viewing it.”

Ing added:  “We saw companies like Barrick Gold just raise $3 billion in a ‘bought deal.’  What this tells me is that there is an appetite for gold stocks.  We’ve had a number of days now where we’ve had bought deals.  This is a signal that the ‘smart’ money that is on the sidelines is now buying some of these gold stocks.

The money is flowing into the sector, despite the tape looking weak.  This is going to be a very solid quarter for the precious metals and the producers because we have a seasonal influence that will be at work.  The indications are that this so-called bull market in stocks is also growing long-in-the-tooth.  There are bubbles everywhere and so this smacks of 2008.  I would tell investors to expect that next few months to be extremely volatile.”

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