Gold will jump as $20 trillion in U.S. debt doubles within 7 years

Brien Lundin, the editor of Gold Newsletter, President and CEO of Jefferson Financial, said recently at the New Orleans Investment Conference, which he is responsible for, that over the period of an eight-year term by a President, the Federal debt doubles.

Assuming that's how it plays out this time around, it means the current $20 trillion in debt will soar to $40 trillion in about seven years.

The reality is raising taxes and cutting government spending has no chance of dealing with these growing liabilities.

In the end, it means a significant depreciation of the U.S. dollar, which also means precious metals in general, and gold in particular, are guaranteed to increase, according to Lundin.

Short and Long-term Outlook for Gold and Silver

Jack Chan's weekly precious metals update.

 

SPDR (GLD), iShares Silver Trust (SLV) Jump on S&P Downgrade

After Standard & Poor’s lowered the credit rating outlook on the U.S., shares of SPDR Gold Shares (NYSEArca:GLD) and iShares Silver Trust (NYSEArca:SLV) both rose, with SPDR soaring to a new record, hitting above the $146 a share mark, although pulling slightly back as the trading day has advanced.

John Kilduff, a partner at Again Capital, said, “Only precious metals will be seen as attractive in the aftermath of the outlook downgrade,” John Kilduff, a partner at Again Capital, said to Reuters. “The overall economic outlook becomes more opaque with this; equities and energies will be very much under pressure now.”

Also noteworthy today is the yield of Greek bonds, which soared today, bringing the sovereign debt crisis back into the eye of investors, which is helping push up the price of precious metals in general.

SPDR was trading at $145.83, gaining $0.78, or 0.54 percent, as of 2:51 PM EDT. iShares Silver Trust was trading at $42.18, up $0.34, or 0.81 percent.

GOLD BUBBLE? WHAT BUBBLE?

by Toby Connor

We continue to hear pundits describe gold as a bubble. Certainly it will turn into a bubble before this is all over but we are hardly in the bubble stage yet. In order for a bubble to form you need the public to come into an asset class. The public is pretty dim and it can take 15-20 years before they "catch on". It took 18 before they noticed the tech bubble.

Once they do start to "get it" we will have about a year to a year and a half as gold enters the parabolic stage before the bubble pops. See the Nasdaq chart below from late 98 to March of 2000.

At gold's top, half of your neighbors will be buying gold (not selling like they are doing now).

At the top there will be lines outside the the local coin dealer waiting for the next shipment of gold to come in.

At the top 7 of 10 billboards you see driving down the highway will have something to do with precious metals.

At the top the guy standing next to you in the grocery store will tell you how many thousands of dollars he made last month off his gold coins.

At the top everyone will have become convinced the dollar is toilet paper and will only continue to decline until it has become worthless.

At the top the population will believe that we have to go back on a gold standard. By the way, a gold standard never stopped any country from debasing its currency. In ancient Rome they clipped some of the gold out of the coins. Roosevelt confiscated and arbitrarily revalued gold in the 30's. A gold standard will not prevent a government from trying to get something for nothing by debasing the currency.

At the top stocks will be universally hated and gold universally loved. In reality, stocks will at that time, represent true value. Much more so than a shiny metal with virtually no industrial uses.

At the top smart money will eventually come to their senses and realize that true value (profitable companies making the necessities for life on Earth) are being given away for pennies on the dollar to purchase a shiny metal that really has no intrinsic value.

Here is a chart of the Nasdaq followed by a chart of gold. You tell me, does gold look like a bubble yet?

Of course not!

I think we might be getting close to the Nasdaq 1998 level, but gold is hardly in the runaway parabolic stage where it rallies over 100% in a year. Not to mention that none of the other signs I noted above are even remotely present yet.

But no one needs to worry about a bubble just yet. We need to have at least one more serious correction similar to what happened in `08 or in tech stocks in 1998 to wash out bullish sentiment before we can start the final parabolic run into a true bubble top.

If I had to guess I would say that will occur during the next liquidation event which should be due in mid to late 2012 as the stock market collapses down into the third leg of the secular bear market.

That should mark the next four year cycle low and possibly the nominal bottom for the secular bear market in stocks that began in March of 2000. I expect the selling pressure at that climactic event will also drag gold down into the correction that should separate the second phase (what gold has been in since early '06) from the third and final bubble stage. Gold will quickly recover, like it did from the last selling climax, and when it does this is when we will see the public begin to panic into gold.

Then and only then can we start talking about a bubble.

At the moment I think we are about to enter the second leg of an ongoing C-wave advance that began in September of last year. I'm expecting this leg to take gold to the $1400-$1500 level before experiencing a major D-wave correction.

I'll be monitoring the advance on a daily basis to keep subscribers appraised of where gold is in its intermediate cycle. When I think we are getting close to the top of the C-wave I'll warn subscribers to take profits and exit the precious metals market so as not to get caught in a D-wave correction.

Gold Scents

Freeport-McMoRan (NYSE:FCX) Down As Metals Drop

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has fallen today as prices of metals overall have dropped. As of 11:48 PM EDT, the stock was at $61.27, a $1.54 decline, or 2.45 percent.

This is all related to the macro-economic conditions in Europe and China, and most recently, with the new job creation numbers coming out that were highly disappointing in the private sector, with about 95 percent of jobs created being temporary census worker jobs, which are pretty much meaningless.

So with everything pointing to a continued slowdown and little if any economic growth, copper prices are expected to drop or grow very slowly in the years ahead. Gold on the other hand will be a strength for Freeport, although copper will be the primary driver of share price for them.

They could possibly divert more resources to gold, as there is a surety the gold bull market will continue on for years.

J.P.Morgan's (NYSE:JPM) Gold Storage Facility

J.P.Morgan (NYSE:JPM) announced today it will be opening a new gold storage facility in Singapore in the latter part of 2010, built in response to growing demand from institutional and retail investors looking for a place to store their gold bullion.

A number of those holding physical gold bullion want or need multiple places to store their bullion, which a new one in Singapore will help meet those demands.

The new storage facility will also help serve the market dealing with physical settlement of futures contracts, which while including gold, will also help with other precious metals as well.

It'll also serve as a storage vault for exchange traded funds and other deals which involve physical settlement of gold or other precious metals.