Wow!  Are these ever exciting times!  

Only a couple or so weeks before the elections.  And very important elections these will be.  The fate and direction of the world will be determined.  Will the Republicans continue to rule or will the Democrats step in to take their place?  But this time I think things will be a little different and we are going to be surprised.

Any idiot watching gold these past few weeks could tell that gold has dearly wanted to climb higher, but I am certain orders have been to contain the gold price below 600 at all costs.  Very important for political party in office to have gold under 600. Can’t have gold climbing with the elections getting closer.

Look at this graph below people!

This graph was the closing day last Thursday. I hate to say this, but I told you so.  What did I tell you and what have I said over and over and over and over?  Gold wants to climb, but presently it cannot because of the extreme pressure being placed on it by the powers that be to keep the price under 600 per before the elections.  Gold wants to climb higher, but is being held down.

And the gold price again on Wednesday?

As I said earlier any idiot can tell that gold wants very dearly to climb higher and with every breath is struggling to do so.  What was that old song by Cat Stevens?  “Can’t Keep It In!”  And that title could be applied to the gold price also as it is going to turn out to be impossible to keep the gold price subdued once the elections are behind us.

You want to hear more about the “crash” in the commodities bull?

“Prudential: Mines remain unable to fulfill global copper demand.” “Prudential Equity said…mines are still unable to fulfill strong copper demand.” “Tumazos (Prudential Equity Metals Analyst John Tumazos) has now raised his estimate of the increase in global copper demand to 2.2% this year. Meanwhile, he lowered global copper mine output by 0.6 mmt “owing to operational setbacks or unrest. …Earlier in this decade we had anticipated more output gains in geologically fertile regions than appear to be developing.” “It is possible that Chinese government reported deliberate false large refined output gains to depress world copper prices…” click

Did you catch what you just read above?  Let’s go over the highlights of what we just read.

• mines are still unable to fulfill strong copper demand
• has now raised his estimate of the increase in global copper demand
• lowered global copper mine output
• Chinese government reported deliberate false large refined output gains

Wow!  Sounds like someone is lying to us folks!  I thought the commodities bull had crashed?  Sounds to me by what I am reading that there is some hanky panky going on with information.  Oh, I am sorry.  You are one of those who do not believe in manipulation and/or scandal.  You are right and I am wrong.  Scandal just does not occur in our financial institutions does it?

We have scandal in the hedge fund industry.

Hedge funds - “Thousands of hedge funds now manage about $1.5 trillion and yet remain largely outside the purview of regulators.” “Recently, the fund Amaranth lost $6 billion.” Click

Scandal in real estate?  Don’t believe it!

Real estate - “Some $2 trillion in new mortgages are originated every year, and housing wealth is increasingly central to the economic security of American families.”  “…the mortgage industry is woefully under regulated.”  “…mortgage brokers are often not regulated at all.”  “…worries are rising that too many bad loans could accelerate the decline of housing prices and hurt the economy. Still, government has done little to tighten rules and bolster enforcement.” Click

And who would dare ever suspect scandal in our insurance and health care system?

Insurance & Healthcare - “The trillion-dollar insurance sector remains poorly regulated by tiny state agencies, despite revelations in 2004 that price fixing by industry giants had cost consumers millions of dollars.” “The $2 trillion healthcare industry also remains rife with fraud, with some estimates pegging the annual cost at nearly $100 billion.” Click

And then there are some nuts who believe we have scandal within our defense industry.

“Defense contracting - “This sector seems headed for a new round of scandals, perhaps comparable to the corruption exposed during the 1980s. In Iraq, whistleblowers have filed dozens of lawsuits alleging contracting rip-offs.” Click

But scandal within the gold industry?  No way Hosea.  

Bill Buckler “The Most Important US Elections EVER…” “The Dow keeps on hitting new highs…”  “What they are NOT factoring into their calculations is the deterioration of the US Dollar…” “To compensate for the deterioration of the USDX since January 2000, the Dow today would have to be at about 13,420. That's just one example, there are many others posted all over the internet, but Wall Street and, sad to say, most investors don't pay any attention to them.” click

Well!  I am glad we have the issue of scandal taken care of.  Uh, oh.  What’s this below?

“Is the White House manipulating the economy to boost congressional Republicans?”  “Can it be that there is an election less than a month away?”  “…some economists do think the white house may poor mouth its deficit estimates so as to generate a pleasant upside surprise if better numbers come in.”  Peter Cary, U.S. News & World Report, 10-23-2006

You know, I like ole’ George as well as the next voter, but maybe some of those lowly bearcats (bureaucrats) under him just may be playing with the numbers?  Didn’t I say this several weeks ago?  You just wait my friend.  When we get these elections behind us the dam being held back now is going to bust.  A friend of mine in the past few weeks liquidated his million dollar portfolio in gold stocks out of panic.

Big mistake.

Everybody likes to hear from John Doody.  John Doody is “The Man!”  John knows this market better than anyone and he used to be a respected Ivy League Professor.  Peculiar last name, huh?  So what does this man know that gives us a reason to so value what he says concerning gold?  John asks us if we think the party is over for gold.  Well, John, what is your opinion?

John Doody - “Party Over for Gold? The Dow hits new record highs Oct 3/4 and gold swoons from $600/oz to $560s. Does that mean the party and Gold’s bull market are over? NO! thinks GSA. It’s easy to forget that Gold trades in two different markets, as a commodity and as money, the anti-Dollar, although in fact the markets co-exist as one. Sometimes both markets move together as they did earlier this year when Gold sailed past $700/oz. Sometimes the markets offset each other and Gold price stagnates, as it did while trading in a $460 to $480 band from Sept thru Nov 2005 before topping $500 in early Dec-05. And sometimes one “market” overwhelms the other, as is happening now. Commodity market sellers drown out the warnings of the anti-Dollar Gold buyers as the greenback’s many problems are ignored.” Click

I have said time and time again and over and over again that gold is merely establishing lows and a bottom from which to begin its upward trek again.  Remember how I talk all the time about encouraging you to try to be part of the 10 to 20% minority that lives above average?  The bottom email from George addresses this subject well.

Hi David,

“…I remember traveling through the Berkshire Mountains around this time of year (autumn in New England is truly the stuff that inspires poetry) and stopping in an antique shop.  Prices were still as high as they had been a year or two earlier, maybe even higher.  My inquiry of the shop owner as to why she kept her prices at those levels met with the response, “People who had money before latest run-up and downturn still have it.  People who didn’t have it, never really had it, and they still don’t have it.  I SELL TO THOSE WHO HAVE IT.  The others were never my customers, anyway.”  

George I. L. 

Regardless of the present state of the economy, whether good or bad, there will always be 10 to 20% in the minority doing better than everyone else.  You need to make sure you will be in that minority as well.  And yes, gold has bottomed as gold veteran and Guru Jim Sinclair believes this also.  Read what Jim has to say below.

Jim Sinclair “As I said recently "The Battle Has Been Won." That means the lows are in. A move above $600 in December gold means a challenge of $612.40. A close above $612.40 opens the door to $682. In time gold will take out $730.”  click

Did you catch that folks what you just read above?  Jim said:

“…the battle has been won.”

And what does that mean?  You will see once we are well away from these elections and the markets can return to “normal.”  If you have a hard time understanding what has been happening just think of that poor little Dutch boy who found himself holding his finger in the dike to keep the dam from breaking and the water from flooding. 

But the poor Dutch boy is running out of fingers and toes.  Will he make it and hold out until November 7?  It will be a close call.  But mark my words folks.  Gold is heading higher and we are already seeing substantial evidence of this by gold’s price action these past couple of months.

Are you ready?

And the pièce de ré·sis·tance?

We have heard it said these past few months that everyone is getting out of commodities. Is this true?  Hogwash!  Some of the biggest institutional fund money even at this moment is seeking to INCREASE their position in the natural resource sector and vis-à-vis, gold and silver.  Read on below brothers and sisters.

The following news text is dated Sunday, October 22, 2006.

“Natural resources and commodities seen as good bets…” “It's more than pork bellies, copper and oil futures.” "You'll see a greater percentage of investing in natural resources. This is a big change to our portfolio," said Russell Read, chief investment officer of the $213 billion California Public Employees' Retirement System. "This will be important to our investment success." “The commodities move, some experts predict, could put CalPERS on the cusp of the next wave of high-flying investment opportunities, perhaps rivaling the golden age of the high-tech boom.” "We are at the beginning stages of a very important transformation," said George Manahilov of Barclays Capital. "Investors are trying to find the niche that can be exploited." “Some experts say the commodities rally has run its course.”  “U.S. public funds have taken a longer view and consider commodities as strategy to diversify the portfolio. Pension plans have invested about $30 billion to $40 billion in commodities during the first half of 2006.”“Today, public funds are estimated to have invested more than $100 billion -- or about 3.7 percent -- of their assets in commodities, experts say. Morgan Stanley predicts public funds investments will double within five years.” “In Europe, major institutional investors have been quicker to embrace commodities. More than 100 funds have poured money into raw materials.” “Read and other experts say prices and demand will continue to be fueled by high-growth emerging markets such as China and India.” Click 

Folks, if the chief investment officer managing 213 billion dollars believes in the natural resource sector, including the precious metals and gold, then maybe you and I should also. Are commodities really DOA?  Someone has been feeding us a crock of bull.  Buy gold now folks, before the big run up in 2007!  

Au contraire Capitaine?

Let’s cover China again as everyone recently seems to have written them off for good.  Our principal question is of course are they still going to have a very significant impact on the rest of the world?  Let’s listen below to what the respectable folks at Weiss Research, Inc. have to say.

“Beijing Will Spend $40 Billion On the 2008 Olympics.” “$59.5 billion will be spent on infrastructure projects in Beijing…” “… the 2008 Beijing Olympics represent the biggest publicly-sponsored works project ever. Consider this: The Hoover Dam was the largest single public works project in the history of the U.S., with an estimated total cost of $2.22 billion in today’s dollars. China will spend eighteen times that amount on the 2008 Beijing Olympics!”  “…whenever government money is spent, it spreads through the economy…” “…by the time the government’s money works its way through the economy, the total economic impact might be up to eight times the original dollar amount spent. That would mean the original $40 billion spent in and around Beijing, could ultimately boost China’s gross domestic product by as much as $320 billion.” “China’s Economy Will Continue to Roar Ahead”  “And remember, as big as the Olympics are for China, they’re just a drop in the bucket compared to how much money will be created, spent, and reinvested as the country catches up with the rest of the world.” Larry Edelson, Money & Markets, Weiss Research, Inc., Martin Weiss click

Let me take a moment here to put in a plug for these folks whose material we just read.  They put out a daily free newsletter that I believe is very much worth while subscribing to.  Remember how I repeat my mantra over and over below?

“Never, never, never buy just one gold newsletter and/or financial publication, 4 - 6 is a minimum… (especially when you find something free!)”

So, consider increasing the research and financial data you need to be keeping up with by subscribing to the Martin Weiss free daily newsletter.  It’s free and very worth while info concerning the markets.  Go to the following link and it will take you to their site to join up.  click

Noted silver guru Eric Hommelberg is also predicting gold to soon begin rising substantially.

Eric Hommelberg - “Gold - Close to Break Out!” “The good old dollar is loosing credibility fast…” “So gold will shine as an alternative for the dollar, gold demand is picking up while gold supply is on the wane... you really think this is gold bearish? No, of course not, the long-term prospects are excellent, the down-side risk is almost none.” “The setup for a powerful run-up is phenomenal, as stated above once gold breaks its downtrend to the upside a run-up towards the $800 mark is in the cards before end of next year. What do you think your gold shares will be worth by then?” “Its my strong believe that within a year from now many people will scratch their head how they could have been so stupid to have missed the major 'BUY' in Q4 of 2006.” click 

Let’s get real folks.  

This supposed fact that every analyst now believes gold is DOA is just plain a lie.  Are you familiar with the very prestigious Gartman Report? Just this last Friday, 10-20-2006, Gartman wrote about the possibility that perhaps gold’s next bull leg is materializing and that commodities themselves may now be giving way to a new leg up.  

Do you comprehend the significance of this?  

And you already panicked and cleaned out your gold and silver portfolio?  Sorry.  In my life time I have often watched stocks climb from literally nothing to over half a million dollars within a short year.  This game is not easy and these oscillations and volatility are part of the process. 

Actually, all the very professional gurus are anticipating a major new leg up in both the gold and resource bull to begin very soon.  Two of these experts in the field are Rick Rule and Doug Casey.  These are two men very much worth paying attention to if you are serious about making money.  What did they have to recently say?  Let’s listen below.

“…Rick (Rule), he is one of the most successful resource investors drawing breath today.”   “…he now believes that gold and silver stocks are about to go "silly" on the upside... maybe the silliest he has seen in his long career.”  “Coupled with strength in the metals, he fully concurs with Doug Casey’s views that we are on the verge of the bull market of a lifetime.” “The concurrence of views is compelling. One of the world’s most successful resource investors sees eye-to-eye with one of the world’s most successful resource speculators—leaving little doubt that the stars are aligning for mega profits in the months ahead.”  click

Who else believes gold is soon ready to take off again?  Citigroup Metals Analyst John Hill is predicting that gold will test the $700 per ounce mark by year end and achieve historic highs of $850 an ounce by late 2007.  So, what do you do now?  Subscribe to Gold Letter to receive emailed reviews of gold and silver mining companies poised to increase in a rising gold price environment.

click here to order

You are probably wondering how ole’ Dave came to understand this ole’ gold bull was still kicking and merely taking an afternoon breather (or why he thinks so.)  Well, I will tell you.  I was literally walking down the street and I was thinking about how neural circuits may provide a substrate for higher cognitive functions such as logical thinking…

Seriously folks…  

I read and then read a little more.  The same tools I use are available to you, but only if you take the time to use them.  There is money to be made in this market, but only if you read and allow yourself to come to an understanding of which way the wind is blowing.  And believe me when I tell you that if you just make the effort you will feel that wind and discern yourself from which direction the wind is blowing.  Don’t let others be the ones to make all the money because you “don’t have time” to stand in the breeze of knowledge.

As a side note I think the following message is important.  

Al Thomas is a fellow newsletter writer who publishes “Over My Shoulder” who many of us read every week.  In 1981 Al sold his membership on the Exchange and with his wife, Carolyn, they lived full time aboard their 41' sail boat, the Aumakua (which means guardian angel in Hawaiian). And they took a 2 year vacation to sail in the Bahamas. Al wrote the following below in his newsletter this last week concerning his very ill wife.

“There just aren't enough hours in the day to do all the things I need to.

Tomorrow is another doctor visit. You don't realize the amount of time required to take care of Carolyn. Until I see her completely cured I will not be able to devote the hours necessary to do the kind of job I want to. She is my number one concern. I love her very much.”  Al Thomas       

Al reminds us there are more important things than getting rich…though that’s OK…like family.  It’s important for all of us to remember we are a community. So let’s stick together as a family and support one another when we are able and in this spirit let’s remember both Al and his wife right now and maybe even send Al an email to encourage him. al@mutualfundmagic.com

Good luck and God bless!

David Vaughn

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