Gold is holding is own and remains strong.

It’s staying well over the 600 mark and struggling to climb and hold above 650. A lot of folks do not want to see that so we can expect to continue to see major battles within the gold markets.

China bores me. Ten years ago no one gave China a second thought. Five years ago interest in China was growing. As early as 1999 China relevance was ignored and analysts thought of the region as a back water banana republic. Today, when China sneezes the entire world pulls out its handkerchief and cringes. China today just can no longer be ignored period. It has the world’s largest population and that population base is growing out and becoming middle class with all the demands that middle class demands.

Why can China no longer be simply ignored?

“The doomsayers on China’s economy were wrong. China’s meteoric rise has surprised most observers, with its economy easily outperforming even the most optimistic expectations.” “No other large economy has grown so fast for so long—over 9 percent per year on average for a quarter-century.” “China’s growth has lifted hundreds of millions out of poverty and created an urban middle class.” “Manufacturing output, employment and productivity growth have benefited enormously from large inflows of foreign direct investment (FDI)…” “Its official foreign exchange reserves, now approaching US$1 trillion, far exceed the country’s total external debt.” “…the Chinese economy is already so large and so deeply integrated in global markets and supply chains that the effect of China’s growth is felt globally.” “Over the past decade, China has become one of the most open large developing economies (as measured by the trade/gross domestic product ratio and FDI inflows and outflows) and also serves as an engine of regional and even global growth. China’s ferocious appetite for imports accounted for over 30 percent of global export growth in 2004 and 2005.” Click

So, for our purposes what does all this crap about China really mean?

• Number one, China is loaded.

• And second China unfortunately (fortunately for them of course) holds the mortgage on the US national debt.

Now, let’s examine real well another bit of important trivia.

“China plans to set up an agency to help manage its $1.07 trillion of currency reserves that would be Asia's largest government-controlled investment fund.” “China, the world's second-largest holder of U.S. Treasury bonds, now invests most of its currency reserves in dollar assets and is losing from exchange-rate movements as the yuan gains. The agency's creation may prompt a flood of Chinese investments in overseas technology companies, mines and oil fields to support an economy that grew 10.7 percent last year.” Click 

Now what did we just read? China is fixing to go on a spending spree to unload some of those ever growing worthless US dollars. And what was one of the items we read that they want to begin buying?

“…mines and oil fields…”

Now I know you are aware what an oil well is but for lands sake what do they mean when they state they want also to begin buying this thing called “mines?” What comes out of a mine? Ore comes out of a mine. What is an “ore?” Ore can be gold, silver, tin, platinum, tungsten, uranium…a whole lot of stuff that is extracted from beneath the earth’s surface. Now are you beginning to understand why gold is such a good investment today along with all the various resources?

Again, just how important is China today to the rest of the world economy? Why are the world economic markets trembling merely at the name of “China” and “Asia” today? Master commentator and analyst Bill Buckler does a most excellent job in defining the position China holds today.

Bill Buckler – “Most of that $US 3 TRILLION plus which the Treasury has piled up in debt since then is now owned by foreigners, and most of that is owned by two nations, China and Japan.” “US investors in particular are running off the cliff which leads to US Treasury debt. It is a well-known (but not discussed) fact that China and/or Japan could bring down the entire US economy, not to mention the US markets and the US Dollar, merely by uttering one word - "SELL".” “What happens AFTER that first reaction has run its course is what happened in the 1970s, when global "liquidity" stampeded OUT of the paper markets even faster than they had stampeded into them and started to chase REAL goods and above all, precious metals. There is no way of knowing how long the "transition" will be.” “Gold has always emerged from such events - there are NO historical exceptions - as the financial asset to which the wise, honest, and TRULY risk averse will repair. It will be no different this time.” Click

Dave,

“I have been reading your letters to xxxx and as I see it you have been losing money in gold stocks. I told xxxx I bet none of the gurus on this page will state they have been losing money. Why can’t the commentaries admit they have been losing money in gold this past month?”

Mike M.

Mike the following are my personal performance averages. Top 10 best performing stocks are up over 2,000% still and our top 50 best performing stocks are up over 500% - 60 minute real time delay when the markets are open. The top 50 represent around 50% of all Gold Letter's recommendations since inception. 

Mike, while I agree with you that there are oscillations up and down along the way what ultimately matters are the averages. And I will agree with you that most writers will not post their individual averages. The good ones do for the most part, but they are the exception to the rule.

Dave,

Don't you know price manipulation when you see it? The PPT is operating around the clock in the junior's market, not just futures. Their actions only prolong the inevitable and will exacerbate the coming depression. Every civilization in history has fallen; America thinks it's so great, it can never fall....ha. Every country that has gone to a fiat currency system has abused it and its currency has collapsed. The price of Gold and all markets are manipulated to an extent that the U.S. citizen can not fathom it. You talk about investors selling Gold to cover margin calls; no way. That's NOT what's going on.

Bill

Do you like metaphors? Let’s hear a metaphor about where China has been, where they are now, and where they are going.

“…a metaphor…is defined as an indirect comparison between two or more seemingly unrelated subjects…” Click

And the metaphor?

Folks, there will be no going back to Egypt. In terms of the new world we are now living in China is a major player…if not THE major player. And China and Asia will be setting the tone for the growth in the gold price for many, many years. They really do not have a choice. They know they have got to start unloading those worthless US dollars as I mentioned earlier. And they have already declared that the resource market and the mines that market represents will be a large recipient of those US dollars.

“China appears to be getting nervous about the billions and billions of U.S. dollars it holds. If it sells those dollars, one clear winner will be gold investors.” “…China might be buying hard assets -- including precious metals and possibly other commodities.” Click

Saw a good movie this weekend that you have got to go see, “300.”

“The Athenians, however, were prepared.” “Themistocles convinced the Athenians to invest the profits from a newly discovered silver mine into this project (a navy-building project of epic proportions); by 481 BC, Athens had a navy of two hundred ships.” “Of several hundred Greek city-states, only thirty-one decided to resist the Persian army; these states were led by Sparta, Corinth, and Athens…” Click

But we know from the movie that the Spartans saved the day. Thanks to that rich silver mine! Gold and silver always shine through to save the day.

“The death-struggle of the Greeks at Thermopylae was long celebrated by ancient historians, and there is no reason to doubt that it was a particularly desperate and merciless contest. The Spartans flung themselves at their enemies with reckless courage.” “I knew now that something real happened here. It is not just that the human spirit reacts directly and beyond all argument to a story of sacrifice and courage, as a wine glass must vibrate to the sound of the violin. It is also because, way back and at the hundredth remove, that company stood in the right line of history. A little of Leonidas lies in the fact that I can go where I like and write what I like. He contributed to set us free.” Click 

Let’s not forget that gold is still very strong. At 600 dollars above the gold mining companies are making excellent money. In the longer run it is better that the price is moving slower and not shooting like a rocket to the stratosphere. With this slower pace we are merely assured that this gold bull is going to last a very, very long time.

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