Well, I know you’re thinking about this. Has gold peaked? Have commodities peaked?

No.

Next subject. Should you consider investing in precious metals? You know…it used to be my goal to introduce the gold market to one and all. I really believed that everyone should be reaping the benefits and profits that come from investing in gold and silver. But I don’t know about this any more. 

Hey, can I comment briefly on the changing of the weather and the arrival of fall? Let me quote below from my pastor whose words are most appropriate for this time of year.

“Today marks the official beginning of autumn. The cooler temperatures are invigorating, and I'm enjoying the hint of color already visible.” 

Fall is a real nice time of year. Pumpkin pie and turkey. Cooler weather and camping trips. Bon fires and weenies roasting on the coals. Hay rides and all. But back to gold and silver. 

I really have to say that investing in gold and silver is not for everyone. I have come to understand that most investors by and large really cannot handle the stress that comes automatically with volatility. And gold and silver mining companies, including the resource stocks, are risky speculations that are guaranteed to come with volatility.

“Wow, you’re telling me not to invest in gold or silver?” 

That’s right. Especially if you are one of those investors who go into massive shock and hysteria when a stock they have bought starts going down in value. In all sincerity if you are one of these investors who thinks prices only go up I beg and plead with you not to invest in the precious metals markets. I continue to receive tons of email from frantic readers who are having mass panic attacks because of present cyclicality. “Yes, Grace, stock prices go up and down.”

Give me a break people.

If you go to the family fair and find yourself in morbid fear riding in the little wagon pulled by an old mule maybe then this is an indication that mules frighten you and you need to stay away from mules. If the volatility of stocks also frighten you then don’t invest/or speculate. If volatility scares you then stay away from the stock market. If you hate getting wet then don’t stand in the rain. Is it really worth potentially making a lot of money if the price you paid was being frightened? 

Dave,

“No discussions of newsletter guys could possibly be complete without mentioning Adam Hamilton. He is great with both fundamentals and technicals, and understands the mental aspect of investing and speculating as well as anyone. Not to mention he is a nice humble guy.”

Tom deSabla

Our society today, for the most part, breeds a weaker and more laid back type of individual. And the investor of today really is often not geared too well to handle the additional type of stress that speculating and investing demands. If you are one of these types then go to Barnes and Noble and buy some colorful gardening books. Lex, from ‘down under’ sent me a very excellent email message. Lex does a good job of getting to the point of what I am trying to say all the time.

David,

“You wrote that you did not care if gold got down to $50 per ounce. That was a bit too extreme, but I guess you are wanting to shock readers into an emphasis on the LONG-TERM.” “My only suggestions about things that you might have left out would be…” “…the need for an investor to clearly formulate objectives, and that includes an exit strategy with "lock-profit" stops. (Aside: The oft-stated "buy and hold" strategy re shares etc is in many cases greed and materialism, yet the Bible reminds us not to be fooled that "a man's life consists not in the abundance of the things he possesses…”

Lex Stewart, Australia

PS thanks for mentioning in one of your articles a few years ago, my son's death from leukemia and the Christian message that his life challenged us with.

Let me bring something up here that is really important in terms of understanding the gold and resource market.

Everyone gets all hung up on rising prices and it comes to be believed and accepted as truth that for money to be made prices must forever be spiraling higher. This is a myth. If gold stays merely around 400 dollars an ounce then we have a very profitable gold mining industry. Understand that as gold does climb higher that more deposits are economical to mine and develop thus we have an ever spiraling premium with a climbing and rising gold price.

Now, let’s talk about the resource stocks.

Everyone is concerned also that commodity prices must forever be climbing higher for mineral stocks and base metals. And here I must go back to Asia and China so hang in there with me. National Geographic just came out with a good article about Chinas’ growth in just their north east territory. China and Asia are growing and even without the United States as a major market the land is not going to wither up and die on the vine. 

“Merrill Lynch remains bullish, saying that a commodity super-cycle is still underway. Merrill analyst, David Hall, expects commodity prices to strengthen from China demand in the next couple of months with focus on copper, fear of mining strikes and increased demand as summer Holidays near an end. Hall said that in the long-term, the cycle will be primarily driven by Chinese urbanization and industrialization, with India following suit.” Click!

It is one of the most conceited myths that China and Asia will collapse without the US as a market. If the US tomorrow is struck by an asteroid will China disappear economically into the sea? Sure a lot of money and potential markets will dry up but Asia itself will continue to grow and thrive.

I suppose that what I am saying here is that it is not the US alone that propels demand and need and growth in this world. When Carthage in the old world was merrily wiped out in the Ancient world by Rome the world of that day survived and carried on and prospered. It is the greatest conceit and myth that the world NEEDS the United States today with capital letters attached to the word “need.” Carthage, too, thought the world could not exist without them. Carthage who?

David,

“Caesar was trying to over throw the Republic, Brutus trying to save it. You failed both Latin and history. Pull your face out of the bag of fries and read before you sound stupid again.”

Scoekl

The world will carry on without the US and if you are familiar with Christian theology you will notice a lack of discussion about whether the US will even be around in force in the last days. And these are facts. Maybe copper won’t forever stay at its present price level so does that mean we now have an over abundance of copper and other minerals in the world and enough to meet all needs for the next generation? The point is that regardless of where prices go in the short term gold and the resource sector will remain an excellent long term investment.

Any of you out there like cheese? 

We got any real cheese connoisseurs out their? I was at this fancy grocery store in town. You know the type. They play classical music over their store speakers. Everything in here is really yuppie and top dog and all. While a little too fancy for my over all tastes I can get good fresh Jamaica Blue Mountain Coffee here which is considered the best coffee in the world. I will often experiment with some of the other unusual items the normal home maker does not purchase simply because you would go broke patronizing this site on a regular basis.

Dave,

“Your article was GOOD in mentioning the need to subscribe to several newsletters and for mentioning credible names. I am glad you did not include the Elliot Wave newsletter in your list.” “I am about to cancel my subscription to the Elliot Wave people. Time and again they have been wrong, wrong, wrong in regards to gold.” “I feel that the Elliott Wave people's main weakness is almost spiritual in that they 'idolize' the late Mr Elliot and have in effect become a cult. Idolatry and cults cause people to become deluded and not to face reality. And they rarely admit to being wrong in their numerous detailed predictions. They either ignore their wrong predictions or on odd occasions wriggle out of it, by attempting explanations that do not fit the data and do not fit what they really said previously. It is a very human tendency (I am not immune from it!), but one I am weary of paying money to be entertained by!”

L.S.

Anyway, back to the subject of smelly ole’cheese...

I was passing the cheese counter and the employee started to educate me on the various types of excellent cheeses out there. On occasion I do discover a good cheese in a restaurant but never can remember the name when I want to buy it later. Anyway, I let this salesman convince me to buy this cheese called “Mimolette.” An imported cheese from north France. You know I am surprised Bill Bonner does not share with us these cuisine tips and food trivia as he lives right in the heart of this land. Anyway, Charles de Gaulle is rumored to have loved this cheese yadda, yadda, yadda… I took some home to try.

It was OK but I am quite happy with my Colby Longhorn with a fresh dill pickle on the side.

Mimolette cheese- “Maturing the cheeses involves storing them in damp cellars and turning them every week. At the same time the surface of the cheese is brushed to remove cheese mites which feast on its surface. As the cheese ages, evidence of mites can be seen in the pitted and moon like surface which appears on the cheese.” Click!

Hey, they’re not kidding about the little mites that gnaw on the surface. It’s real neat to bite into 20 dollars a pound cheese and know you’re biting into where mites have been. But these are French mites so it’s ok. I was impressed.

“The French are predominantly Catholic and thus have no eating prohibitions…” “Moreover, the Gauls are not afraid to eat anything. Kidney, brain, sweetbreads, tripe, blood sauces and sausages, sheep's foot, tongue, and intestines are all common in French cooking…” Click! 

And yes, I guess the French eat even cheese mites.

The humble cheese mites – “…has reddish/pinkish legs.” “They are also to be found on old cheese.” Click!

I know you think I am attempting to apply reverse psychology when I tell folks to get out of gold mining stocks, but I really am not as I am being totally factual in how I am illustrating true human nature.

“Of a truth, few men desire freedom, the greater part are content with just masters…” Sallust, 69BC

Sallust (Gaius Sallustius Crispus) was a noted Roman historian between 86 – 34 BC. This fellow was writing about the death of the Republican Era and observing its transformation into the new “Roman Empire”. Kind of like what is happening today in the United States, huh?

Anyway…

Part of the problem today is the dying away of the easy manufacturing jobs that brought semi guaranteed good incomes for life and personal security. Ford comes to mind. The majority of folk are content to work as a simple blue collar worker as long as the pay check comes each week and a guaranteed pension plan awaits down the road. But those days and opportunities are quickly fading away. My heart goes out to the masses as the ones who will survive in tomorrows financial world will have to be independent thinkers who take charge of their own destinies and their own investments.

Our world is changing today…both financially and economically. And only the risk takers and those who can thrive comfortably in this element will survive. And this is a fact. What more can I say?

What can I say about those who refuse to change and to adapt to this new world order?

“Duty is with you in every moment of your life, in every breath you draw, and duty cannot be ignored to pander yourself.” Collen McCullough, The Grass Crown

The above text was a mom trying to teach her young son to be responsible about his duties. 

Ford has announced recently that they are going to have to lay off an unprecedented number of craft union employees because the company is moving toward bankruptcy. I am sure many of those employees will long for the days of old when their lives were comfortable and the most major decision each week was where to take their family to dinner. Now the question is where is the money going to come from tomorrow to even think about taking my family out to dinner.

The change that is occurring in our world today truly is significant and I really don’t know what the majority will do tomorrow as their lifestyles go down hill. But a small percentage will survive. I always tell folks that at least 10% to 20% will survive and even thrive in tomorrow’s new world. And yes, these will be the risk takers who have the courage to speculate with their future and their finances. 

And in tomorrow’s world speculation will not be an option.

I believe our world and age too is changing from a Republican type government to something radically different. An empire? Maybe that is a bit extreme, but I can smell change in the air and 9-11 provided a leap forward for the masses to accept any kind of change…good or bad. And I think when we get to this new point we will wish we had stayed behind in the old world. Though change is always inevitable it is not always for the best or in our best interests. But I am confident that tomorrow’s world will be in someone’s best interests. That fact you can take to the bank.

The US dollar is headed lower, lower, lower and mining production is falling, falling, falling…don’t you agree? Did we say that mining production is falling? 

Gold will climb higher again and to gauge how high it eventually will climb ultimately will be determined by how low it falls today. Just have a little patience…can you spell patience? Subscribe to Gold Letter, Inc. to receive emailed alerts of under valued gold, silver and resource stocks. When you order you will receive a report covering 21 gold and silver mining stocks to buy now. 

The two quotes below are most appropriate for this market.

John Doody – “Never, never, never buy just one gold stock, 4 - 6 is a minimum…”

Click!

And the following quote below is from ole’ Dave.

“Never, never, never buy just one gold newsletter and/or financial publication, 4 - 6 is a minimum…” - David Vaughn

I really believe the time is past for many to get out of this market because of the tremendous stress involved with striving to be successful. And of course I’m referring to those who cannot emotionally take the extreme volatility that is a part of speculating and/or investing. It’s not easy, but then nothing worth while ever is truly easy.

“UBS is bullish on gold longer term, as indicated by its forecast of an average spot gold price of $750 in 2007.” Click!

The Union Bank of Switzerland (UBS) is a private investment and securities firm in Switzerland that manages over 2.5 trillion Swiss francs. So I think it means a great deal that these folk believe gold will average well over 700 an ounce in 2007.

Making money is probably the most difficult thing in the world you will ever do. And second to making money in terms of difficulty is keeping it and holding on to it. Try doing both. Making money and holding on to it. It’s tough. A lot of work involved and a lot of trips to the CPA and others.

Ever heard of Greg Silberman? This writer does a real good job of explaining where we are in the gold bull market presently and he touches on where we are very, very soon to be. Read on below.

Greg Silberman – “This may very well be the last shake out before the next multi-year Bull run begins…” “With a housing debt burden in excess of $2 Trillion, the economy will not survive a slowdown for long before debt IMPLODES. The Fed obviously knows this and will attempt to stimulate the economy by repeating what they did to halt the 2000 – 2002 Bear Market. Slash interest rates.” “Fast forward to 2006: The public is even more weighed down in debt now than they were in 2000.” “The psychological pendulum has swung from over-exuberance to cautiousness and is on its way to despair.” “What asset class could even remotely be big enough to substitute for Housing? The answer, for a battle-wearied public, is possibly none. No asset class is big enough to absorb the necessary funds to make up for the Real Estate bubble. Hold on! There is one exception.” “The asset class that would benefit most from slashing interest rates would be Gold. Gold will turn around swiftly as it senses a large monetary reflation is underway. We are not there yet, but this important fact ensures that the current drop in Gold and Gold Stocks will not take out the June lows and will probably be the last major correction before a multi-year Gold Bull market gets underway. Hold tight until psychology swings back in favor of Gold. More commentary and stock picks follow for subscribers…” Click!

Merrill Lynch is another financial institution whose analysts believe we are still in a “super bull” market in commodities that has a very long way to go yet before reaching its end.

“INVESTMENT house Merrill Lynch stuck to its view that there was a global “super-cycle” under way in commodities…” “Merrill Lynch analyst David Hall expected commodities prices would strengthen in the next couple of months on a rebound in Chinese demand, especially in copper, fears of further strikes at mines and renewed demand as the northern hemisphere countries ended their summer holidays.” Click!

Do you really want to know what awaits the future for our children…perhaps your children? Are you sure? 

I went into a Wal-Mart this evening to pick up a few items and of course who greeted me but an older gentleman probably in his early 70s. As he greeted me he handed me a buggy. What dignity to look forward to working during the last years of your life at a Wal-Mart handing buggies to customers as they walk in the door. As a nation this should be a wake up call for those who have not yet reached retirement age of what potentially awaits them in their retirement. And do you think this fellow was down there for the fun of it? No, he was trying to earn a few extra dollars to supplement his social security and/or pension income. 

Will that be you in a few years?

David,

“Let's examine for a moment the terms "bull and bear" If you've ever watched a rodeo, when the bull comes out of the gate, he will fiercely toss and throw the rider up and down and around. Most riders will be shaken off rather quickly, and walk out of the arena disgusted. Some riders become badly injured. Those riders who last the longest reap the greatest rewards....”

Tony S.

And you cannot handle the fear of a volatile market? Well, take your pick. You can experience fear today or push buggies for Wal-Mart when you are older. Your choice.

I know, I know…I could have said more, but that is your job so send me an email.

CONTACT INFORMATION
David N. Vaughn
Gold Letter Inc.
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