Watching and trading the Gold Price for 30 years, this advisor sees $1920 being breached soon...
WITH HIS CAREER in the financial markets spanning three decades, Brien Lundin serves as president and CEO of Jefferson Financial, the highly regarded publisher of market analyses and producer of investor events.
Publisher and editor of the Gold Newsletter – a cornerstone of precious metals advisories since 1971 – Brien Lundin is also host of the New Orleans Investment Conference, the oldest and most respected investment event of its kind, taking place this year on October 24 to 27th.
Here, Brien Lundin explains to The Gold Report why he thinks money printing by the Federal Reserve will soon raise the Gold Price above its summer 2011 high of $1920 per ounce...
The Gold Report: We just had a third round of bond buying in quantitative easing (QE). Will QE3 help the economy?
Brien Lundin: It will not help the economy, but it will help Wall Street. It will help elevate the stock market, including precious metals and resource stock prices. Although that was not the Fed's stated goal, it will be the ultimate result.
As I have written lately, we now have "QE as far as the eye can see." There is no end to it. The Federal Reserve will use QE until it works. If it does not work, the Fed will ratchet up the program and print more money until it does work.
The Fed is using the brute force of money creation to eliminate the US unemployment problem, but that is not a foundation upon which a sustainable recovery can be built. At the same time that the Fed is trying to build a towering economy, it is eroding the very foundation of that economy by issuing vast pools of liquidity.
TGR: At a recent Casey Research Summit, some speakers suggested that the stage is being set for inflation. Do you agree?
Brien Lundin: I see the danger, but I think it is important for investors to recognize the differences between monetary inflation and price inflation.
Price inflation is a symptom of the underlying disease, which is monetary inflation. Every new piece of fiat currency created in the world that is not backed by gold raises the relative value of tangible assets, primarily the monetary metals gold and silver, but also other commodities.
For a number of reasons, I do not think we will see soaring price inflation in the US as we saw in the 1970s anytime soon. There are other very powerful parallels with the 1970s, but I do not think that retail price inflation will be one. We are living through monetary inflation right now. That is why precious metals prices are rising.
TGR: The August edition of Gold Newsletter predicted what happened in the beginning of September: a Gold Price close to $1800 per ounce. Where do you see things headed?
Brien Lundin: That prediction of a mid-to late-summer price breakout was based on two things. First, typical seasonality issues came into play. Second was seeing gold trade into a consolidation pattern of an ever-narrowing price trend.
This kind of consolidation pattern has been evident many times before in this long bull market for gold. Eventually, the price of any commodity will break out of such a pattern and typically will return to the trend that was in force beforehand. For gold, the earlier pattern was an upward trend, so the odds were that it would break to the upside, and it did.
Breaking to the upside, the price pretty much predicted some action by the Fed, but QE3 really exceeded anyone's expectations for such action. I think the near-term goal for gold is to exceed its previous highs of around $1920 per ounce. That will create a foundation for further gains.
TGR: Silver has followed gold higher. What is your thesis for silver going forward?
Brien Lundin: Precisely the same as gold. Buying Silver provides optionality on gold. It is a lever to Gold Prices. Silver rises more quickly than gold and it falls more quickly than gold.
Despite its volatility, or rather because of it, silver is a way to realize greater profits along the long-term uptrend by playing the interim cycles.
A lot of people talk about the advantages silver's industrial uses provide. But the industrial uses really play into the price when silver is under, say, $10 per ounce. When the price goes north of $10 per ounce to levels that we see today, it is purely due to silver's monetary role.
TGR: You have gone from a largely passive position in most of the companies you write about to an aggressive position. What happened?
Brien Lundin: This summer, a few of the companies that I recommended were too good to resist even in a down market. I recommended that readers peck away at these stocks and accumulate them, buying a little bit here and there on weakness. I advised not jumping in headfirst until we saw signs, or even confirmation, that gold was breaking out of its consolidation pattern. Once we saw that happening, I told readers it was time to get more aggressive and start building larger positions in junior mining shares that remained dramatically undervalued.
TGR: Did you see that as a bottom?
Brien Lundin: Yes. We bottomed in late July or early August. It was the typical seasonal pattern we predicted, just like clockwork.
TGR: How do you like Mexico as a jurisdiction?
Brien Lundin: Mexico is a great place to invest. There has been a lot of news about the danger of the drug gangs, but the companies in production or working there are doing fine and handling any issues.
TGR: The New Orleans Investment Conference is approaching. What can attendees expect to take away from this year's event?
Brien Lundin: The conference always seems to come at a crucial turning point in the markets, but with the advent of QE3 and the November election, I cannot think of a more important time for investors to be prepared than right now.
We will have a blockbuster roster of geopolitical and economic analysts to talk about the election and its impact on the economy and investors. Charles Krauthammer, probably the most influential political commentator in America, will be there, along with Rick Santelli, the godfather of the Tea Party. Peter Schiff, Sarah Palin, Dinesh D'Souza and Marc Faber are coming. Doug Casey and many of today's top precious metals and resource stock analysts will speak.
We have some fun events planned as well. This year's political debate will pit the conservative Charles Krauthammer against the liberal James Carville, with Doug Casey defending the libertarian position. That is always a big hit.
TGR: Before we let you go, do you have an election prediction?
Brien Lundin: Looking at the political landscape right now, I think the odds favor President Barack Obama's re-election. I would put the odds at 60/40 right now. Obama's re-election would be an extremely bullish development for investors in gold, silver and resource stocks.
TGR: Why is that?
Brien Lundin: It would signal a continuation of government spending and money printing. Mitt Romney has spoken out against QE and has said he probably would not reappoint Ben Bernanke as Fed chairman. In contrast, the Obama administration would apparently continue the policies that have led to these high metals prices.
TGR: Brien, thanks for your time and insights.
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