Dear Trader Dan,

I am a reader of Jim’s newsletter… and go along with the general thinking about gold that I find there.

However this morning a newsletter from Nick Guarino came across my desk with more than alarming predictions. He is claiming ‘gold is trading near its all time record high and.soon the bubble will burst and gold will plunge’.

This is what he is saying:

“gold is at the end of an 8 year bull market… moving from 275 to 1075. It has peaked and now is ready for its death plunge…”

He is saying, ‘the government’s spin about the Chinese government buying gold, etc. is fraud designed to lead the gold sheep to slaughter. Gold is not going to 2000 but to 200.

He was one of the first to say that gold at 300 was a buy. Now he says it is a sell.

I ask you about this since we are a small company involved in buying and selling, among other things, both gold and silver bullion. We continue to tell our customers to buy based on information from experts such as you, but now I ask has the game changed and will we be misleading our customers if we continue to support the idea of inflation, i.e. higher priced metals, while Nick is crying deflation. I ask because he was right about ten years ago in predicting exactly what has happened and is continuing to happen financially to the banks, to AIG and so on. He is saying the information about ‘printing money’ is also false. His reasoning about what is happening to the gold market resonates with what we are seeing in our business. That is more people selling rather than buying.

I would really appreciate any insight on this you can share. Can it be that this is a situation creeping us on those of us who have our eggs in the gold basket? Plus I am concerned about giving people the wrong information.

Sincerely,

Lois

Lois,

What “bubble” in gold? Does Mr. Guarino know what a bubble looks like? Take a look at the gold chart and tell me that is a “bubble” chart. The notion is absurd.

Also, if the deflationist argument is correct (the same one we have been hearing for 7 years now) why is the Continuous Commodity Index moving higher and crude oil is above $70 a barrel after having moved from $35 in three months time? Also, why is the bond market making new lows and threatening an almost 30 year uptrend? Those are not signs of deflation - they are signs from the market that it is expecting inflation on account of the printing of gazillions of dollars out of thin air.

In order for the deflationists’ argument to take hold, the Dollar will have to mount a SUSTAINED BULL market rally. Where is that supposed to draw its support from with more and more nations moving away from the Dollar in their trade as well as slowing the rate of their buying of US debt obligations?

Additionally, his claim that the Chinese government’s announced buys of gold is fraud is asinine. Anyone who understands the Chinese knows quite well that nothing that originates out of that country in the officially sanctioned newspaper or press comes out unless it represents the thinking of the highest echelons of their government. Besides, their fears about the mismanagement of the US Dollar and that effect on their huge reserves are quite real, protestations to the contrary by Mr. Bumpkin Guarino.

For gold to collapse in price, the deflationists have to prove to their groupies that the Dollar is entering a bull market in the face of increasing supply and falling demand. If they can do that and convince me that the laws of supply and demand no longer function in regards to the greenback, then I will become their disciple and will gladly throw out everything ever written about economics.

Jim has spent literally years of his life attempting to educate people about gold, writing article after article about it and the Dollar not to mention the chaotic geopolitical scenes that continue to make their way across this life’s stage. If that is not enough to convince you that gold is close to entering a period in which it will move higher in spite of the antics of the bullion banks at the Comex, then I am afraid nothing will ever convince you.

Trader Dan