The latest from Lance Lewis is posted below. Also, nice quote from Jim Rogers this week on gold..."I own some gold and if gold goes down I'll buy some more and if gold goes up I'll buy some more," ... "Gold during the course of the bull market, which has several more years to go, will go much higher"

Words from the wise - VHF

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No Tarnish for Gold

Dec 12, 2008 11:45 am

Lance Lewis

What could cause gold to “crater for a long time” (I assume you mean in terms of its dollar denomination)?

1. DuPont could finally discover the secret of alchemy and make gold essentially worthless.

2. An asteroid could hit the planet and split the Earth into a thousand pieces, which would make gold irrelevant.

3. The entire planet could pledge their allegiance to the dollar “because it’s pretty” and become willing slaves to the US because it’s in their best interests.

4. Last, and my personal favorite, gold could blow off to $1 million per troy ounce, which would then most definitely set it up to potentially “crater” from that price for quite some time - probably.
There may be others, but those are the first things that come to mind.

There are only 2 choices for the US: Default or debase. Given those 2 choices, I honestly don’t see a realistic scenario where gold could fall dramatically from its current price.

If asset liquidiation continues and inflation doesn’t resume, then tax receipts will collapse and the US government wont’ be able to service its debt. Government default would be inevitable, which would trigger a collapse in the dollar (very much like what we saw with Iceland a few months ago), and gold would soar.

On the other hand, should the Fed and other central banks continue to “print” and simply debase their currencies through inflating (which is the direction I believe we are going), then gold still soars. It’s a “win, win” situation for gold bulls at this point in my opinion, just as it always has been if one was willing to take the long-term view and ignore the short-term volatility and noise.

Most may not realize it (because they're so focused on newspaper headlines about “deflation”), but even now, gold is just a few dollars away from going positive on the year, just as it already is positive by a wide margin in most other fiat currencies (gold even made a new high in British pounds just this week).

There aren’t many assets that can say that they’re even up YTD in 2008, let alone making new highs, as gold currently is many foreign currencies. Even US bonds were down on the year (in terms of dollars) up until a few weeks ago when the Fed indicated it might start monetizing the long end, which then precipitated a short squeeze.

-Lance