Leeb:  “Eric, I’m focused on what is happening in Europe right now.  After 6 consecutive negative quarters of GDP growth, Europe appears to be turning around a bit here.  I think this is extremely significant because if you go back to 2011, commodity prices started to decline on the heels of weakness in the European economy.

Because Europe is the largest economic bloc in the world, this upturn in their economy has put not just a bid under gold and silver, but commodities across the board.  As I mentioned last week, when you read the mainstream media you get the impression that China is broke, and that some sort of cataclysm is getting ready to crush the economy....

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“But the other day, and this did not get any headlines at all, the year-over-year electricity usage in China jumped a very significant 8%.  The reason I bring up electricity usage is because it’s something that no one can quarrel with.  That’s a very, very hard number, and it does suggest that an significant acceleration in the Chinese economy has already begun.

It also suggests that China’s leadership is really affecting the kind of transition that will be quite dramatic.  We are talking here about China urbanizing the equivalent of a staggering 80% of the U.S. economy.  Imagine if 100% of the U.S. citizens were in rural communities and we wanted to urbanize 80% of them over a 10-year period.  That’s what China is working on right now and the implications are absolutely extraordinary.

This is coupled with the fact that China is also working on building out a massive electric grid.  It appears the Chinese are on track to accomplish their goals at the current pace.  The West had better start paying attention to what is taking place in the East or it’s going to be a very tough century for countries like America.

We have also seen a strong recent relative performance by China’s small-cap stocks.  That may not sound like a big deal, but if you go back to the early 1980s, the U.S. began to see a dramatic outperformance by small-cap stocks, which set the stage for a major transition in this country.  We not only had a huge bull market, but we had an economy that transitioned from high inflation to lower inflation.  We also had real economic growth that accelerated to more than 5% a year for the subsequent five years. 

So we may be seeing an early sign that China is really ready to see an acceleration of their economic growth once again.  If this is the case, it may mean the uptick in Europe has some legs, and possibly in the U.S. as well.  All of this points to higher commodity prices.

We are seeing some profit taking in the precious metals so far today, but this type of action is extremely healthy.  We will get back to the metals in a second, but the key is the way the world is shaping up right now.  The world is beginning to look like this:  China, Russia, Germany on one side, and all of the rest of the nations on the other.

I think you are going to see these countries (China, Russia and Germany), sooner or later, form some kind of currency bloc in which gold has a primary role.  Then it will be off to the races for gold, and the acceleration in the gold price at that point is really going to shock investors.  But, regardless, we have made a bottom in commodities and precious metals, and they will now head dramatically higher.  The only question right now is, when do the metals really start to accelerate to the upside? 

Getting back to Germany, it is very strange because even though they have a very strong alliance with Russia and China, they also call the shots in Europe.  For what it’s worth, Russian leader Vladimir Putin spent a lot of his life in Germany.  His kids are in Germany right now, and his kids are fluent in German.  There is also a very strong relationship between Angela Merkel and Putin.

But all of this is playing out in a way this exceptionally bullish for precious metals.  All of this also points to a time when gold will have a primary role in the world’s reserve currency.  This is such horrible news for the U.S. dollar.  It is getting very late in the day for the U.S. right now, and because of this fact it is so important for investors to protect themselves by buying physical gold and silver.

Silver has been getting a bid lately not just because of the monetary aspect of the metal, but also because of the industrial aspect.  So the recovery in Europe and China, plus the intense focus of the Chinese and the Japanese on building out renewable energy economies, means that silver is now set for a major bull market.

As I have mentioned previously, photovoltaics requires a lot of physical silver.  Right now silver is only about $23.  There will be a lot of volatility in silver, but investors in haven’t seen anything yet.  The only question is, when does the silver market see that incredible and rapid takeoff to the upside?

But with China, Russia and Germany on one side of the table, and everybody else on the other, it is incredibly important that investors position themselves ahead of what is coming.  Buy precious metals, whether it be 10%, 20%, 30% or more of your portfolio, whatever you are comfortable with, just buy them now while they are still cheap and hold on to them for the long-term.  You will be glad you did down the road.”

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Eric King

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