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Ing:  “At the year end we had a nice rally in gold.  Everybody thinks it is a dead cat bounce, but so far gold has been hanging in here.  The $1,275 area is a level that I would watch.  If gold can break through $1,275, then the upside move will accelerate....

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“There is a great deal of talk right now about the Fed tapering and what Yellen’s thoughts are regarding the $17 trillion US debt.  But this is just a lot of noise for the month of January.  Basically what I am looking at is the US dollar which has rallied after the year end collapse.

But it’s becoming apparent that the technical factors which really hurt gold last year, that is the futures related selling, have abated.  In fact, some of the players such as JP Morgan are now on the long side, on the buy side.  And given the thinness of the gold market, I firmly believe gold is going to experience a huge bounce inside of this oversold vacuum.

We also have good evidence that Chinese demand remains double-digit, which is very firm.  Even on the Shanghai Gold Exchange they continue to take delivery.  These deliveries on the Shanghai Gold Exchange are running at roughly 30% of the near-term contracts.  That is a large percentage of deliveries in terms of the overall contract structure on that exchange.

So the bottom line is we still have strong physical buying in the Far-East.  Meanwhile, the gold companies will be reporting their last quarter and year end results, and my expectation is, given the fact that the average price of gold was $1,400 last year, a lot of these producers’ all-in costs are around $1,200, so there will be a lack of earnings and cash flow.  We may also see some reserve write-downs.

With that widely held bearish expectation, my belief is that the stocks won’t budge to the downside.  In fact, they might even tick-up because this has already been discounted in the stock prices.”

Eric King:  “Any other surprises in 2014?” 

Ing:  “Well, all is not well.  We are already seeing evidence coming out of Europe that all they did was kick the can down the road.  The European Central Bank has yet to be tested, notwithstanding the rhetoric that they will ‘stand behind everything and do all that they can.’  But my belief is that we will see a test of the European Central Bank in 2014, and that test might not look so good when the dust settles.”

Eric King:  “If that test of the ECB starts to unfold and the situation looks dicey, will that rock the markets?”

Ing:  “Well, Eric, you know a chain is only as strong as its weakest link, and Europe is the weakest link.  So I would be very cautious.  The overall markets seem to be treading water.  The reality is the stock market is very expensive as we enter 2014, especially when you look at the fundamentals and the price/earnings multiples.  While investors are looking at the glass as ‘half full,’ the reality is the glass is ‘half empty.’  So I would urge investors to be cautious with respect to these other markets.”

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