Tony Lepage

If you DO NOT have gold or silver, you will be leaving yourself open to some major financial trauma that is coming very shortly. Simply looking at the trade deficit as a percentage of GDP through history, you can see that any time the trade deficit has approached 4 or 5% of the Gross Domestic Product of a country; the economies were experiencing hyperinflation and went into deep recessions and or depressions. In the current case of the United States of America, because they are the international reserve currency, it will affect the whole world. Two years ago, this percentage was 3% of GDP, now it is 5% and pushing towards 6.5% of GDP.

Examples include Argentina in 1980, was experiencing hyperinflation. Brazil, in 1981 was experiencing hyperinflation. Bolivia, German–the tipping points of all these countries was when the trade gap as a percent of GDP had approached 4.5, 5, 6% of GDP.

The signs of trouble are becoming very visible. The cracks are evident and getting bigger. The global trade imbalance is the hallmark of the problems with the US economy and we’re in the middle of the danger zone right now.

There are several large lies being told and it only takes a few minutes of looking at the world to see them. Lies. Inflation and the CPI, we’re told inflation is 2-3% CPI is obviously under reporting inflation. To the average person, it means your income is NOT keeping up with your expenses. What happens when you can’t afford to buy anymore? We’ll buy fewer products and thus, Asia will have less to reinvest into the United States and then interest rates will become even harder, if not impossible to control.

Major problems:

1. The US dollar is extremely vulnerable to an extreme devaluation.
2. The US economy will slow
3. The Euro will no longer be an alternative to Gold as an alternative to the US dollar as it has its own difficulties.
4. Derivative and hedge funds will have large problems.
5. You’ll make money, let alone save your money, if you buy gold and silver bullion. You’ll make the most buying gold mining stocks. There will be the best returns especially within the junior mining sector. It’s like buying IBM in 1991; you’ll make money, but not as much money if you would have purchased Cisco Systems.

Blither, Blather. I’m sick of chatter.

Cycles are a very interesting thing. Since my entrance into the market, I’ve noticed something quite obvious. Market bulls scream when the market is down and gold bears scream with a 1% drop in the gold spot price. Take a look at CNBC, their hot headed commentators make very bold statements that are quite foolish.

“Commodities are dead!” yells Jim Cramer.

I’m a firm believer that many don’t want to see gold up and will sell it when it starts looking strong. We’re on the Titanic before it’s doom is obvious to everyone and the rich are telling the others that the lifeboats are useless. Do you believe them? Perhaps they are oblivious to the major macroeconomic shifts that almost certainly spell doom for the US economy. Perhaps they feel that increasing the core interest rate won't cause a recession like it has the last 4 out of six times. The funny thing is, it’s getting harder and harder to hammer the gold bull. Last week, gold was up $2.30 to close the week at $440 per ounce. Recall the December high of $458. Commitment of traders saw the largest net increase of 55 000 contracts to the short in one week. It has been an extremely long time since a switch that large has taken place. There certainly hasn’t been a change in interest to the short of gold this large in at least 3 years.

Translation- Commercials are heavily short the gold market, increasing their short position over 70 000 contracts over the last two weeks and this may cause gold to be down for a few weeks. I must add that the commitment of traders report is not a directional tool but does tell us where the interest is. Big money can make things happen.

I began by speaking of cycles and will interpret what they mean for us here. While the hot heads yell bull and bear and throw out reasons why the gold market is overheated, it is interesting to note that for the last 29 years, gold has been seasonally lower in June and July to gain strong strength in August. If this is the case this year, watch for gold to easily surpass its February high of 445.00 and challenge the $458 mark. Passing this mark, there is little resistance.

It’s not surprising that there has been movement to control the Gold market. Between the China-US trade issues, oil’s new highs, gold nearing its highest level in 16 years, there is significant reason to take the reigns of gold.

What did gold do in response to this? Its spot price fell just under 1.5% on Monday and Tuesday. Not all that impressive. In fact! Commodity stocks, specifically Gold stocks have become market leaders these last two days! Gold spot prices are holding up well under significant pressure and gold stocks have been gaining momentum.

Gold juniors. Very Bullish. Opportunity of a lifetime.

The Markets

Today we had impressive 3.8% rise in GDP. Oil prices have dropped over $1 from their $60+ high. Bonds are down. No rally in the markets? What’s with that? What’s the problem Mr. Dow? Gold stocks rallied.