GOLD IS SURGING

Currently, gold is showing real strength. This clearly appears to be the onset of what we call a “C” rise. These rises are the strongest rises within the bull market when gold has consistently reached new record highs.

Plus, the fundamentals continue to reinforce this. The rescue packages alone mean that gold will be the beneficiary of this. That’s especially true when we sit back and put what’s happening into perspective…

Probably the most shocking revelation was how much this economic bailout is going to cost and how fast the numbers keep growing…

ASTRONOMICAL & STILL GROWING

At last count, the Federal Reserve and the government have either lent, guaranteed or spent $12.8 trillion in their efforts to get the economy back on track. We know that these numbers lose their significance after a while and it’s hard to relate to them but we’ll try…

You may remember a couple of years ago when a study was done by two respected economists estimating that the total cost of the Iraq war would eventually reach $2 trillion. At the time, people were shocked. But compared to the nearly $13 trillion for the economy, the Iraq war expenses now seem small in comparison.

Looking at it another way, the value of all the gold in existence since the time of Christ is currently worth about $2 trillion. In other words, just the costs to bail out the economy and nothing else, like Social Security, military, infrastructure, is so far going to be more than six times all of the gold that’s been produced over the past 2000 years. (Just last December the cost was three times, which illustrates how quickly the costs have multiplied over the past five months.)

MORE THAN HISTORY IN THE MAKING

This is beyond shocking and it’s difficult to know what the full extent of the repercussions will be in the years ahead. Obviously, the dollar will fall sharply and gold will soar (see Chart 1). Interest rates will eventually move much higher and bonds will plunge.

Beyond that, we’re entering uncharted territory so no one really knows because there’s never been a crisis of this magnitude in the history of mankind. Ultimately, the spending will probably make things better for now, but there’s a high price to pay to get from here to there.

The Aden Sisters

RUF