Leeb:  “My thoughts are that Bernanke surprised me last night.  He came across as very dovish, and this is a man that knows exactly what he is doing.  He doesn’t speak without thinking about what he is saying and what effect it will have.  So you have to ask yourself, why was he so concerned about getting across a message that the Fed is still quite dovish, and highly likely to continue for quite some time with QE?....

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“There are a couple of reasons:  One is the economy is not nearly as strong as what has been painted in the press.  So the economy is still in recession.  The other concern Bernanke has is that the U.S. dollar has been very strong.  Any suggestion of cutting back has seen the dollar surge and that is not what the Fed wants.  So the Fed is trying to talk the dollar down.

In that environment, how can investors not be bullish on real stores of value?  Whenever a country’s currency strengthens, they immediately do whatever they can to bring the value of their currency down.  So gold and silver are starting to surge once again.

I have to tell you that I don’t think the West has given up yet on trying to hold gold down.  But right now you have backwardation in gold and that’s rarely ever seen.  This is only seen when there is a shortage of gold.  Where is that shortage of gold?  In the West.

So I definitely think this rally in gold has some legs, but the West may still put up a fight.  They will try to talk the dollar down and still keep gold prices under control.  But I think it’s a question of months before they capitulate on both gold and silver.  There is a continued flow of gold from West to East, and now you have three countries in Europe fighting to be major hubs of yuan trading.  We also just recently saw another huge Chinese accumulation of gold.  That’s why the West is short of physical gold here.

So it’s getting tougher and tougher for the West, and I believe that gold has made a bottom.  When you saw that one day when gold traded under $1,200, and then reversed and came back up, that’s the bottom.  The only question now is when does this next leg higher in the secular bull market really begin to take off?  When the price of gold really starts to surge there are so many shorts that need to be covered. 

Right now the West is desperate because they see themselves as losing ground every day against China.  The West continues to fight the ascendancy of China, but it’s a losing battle.  So we are going to see an inflection point in the price of gold where all of these resistance levels are blown out on the upside.  Gold will roar through them like a hot knife through butter.  As much as that will happen for gold, magnify it a couple of times for silver.

And for investors holding the high-quality juniors, which really are the only source of incremental gold in the world, these stocks will end up in a mania at some point.  All of this price destruction we have seen will be a distant memory.”

© 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.

Dr. Stephen Leeb: Chairman & Chief Investment Officer of Leeb Capital Management and the

author of “Red Alert: How China's Growing Prosperity Threatens the American Way of Life”

Just released, to order from Amazon CLICK HERE.

The audio interviews with William Kaye, Marc Faber, Stephen Leeb, Dr. Benn Steil, Eric Sprott, Andrew Maguire, John Hathaway, Dr. Paul Craig Roberts, Nigel Farage, Rob Arnott, Egon von Greyerz and Art Cashin are available now.  Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf by CLICKING HERE.

Eric King

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© 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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