Still Waiting For Gold to Crash? Better Read Below...

Dow Theory Letters publisher Richard Russell has issued an uncharacteristically bullish statement on gold.  Russell, who is perhaps that most famous and enduring market newsletter publisher, called the bottom of the 1972-1974 bear market.  Russell uses some proprietary indicators to forecast market trends. He's probably been, over the last 50 years, the most consistently accurate market forecaster.  Here's what he says about gold:

“Meanwhile, a great bull market starts, it's a bull market that mirrors the demise of the dollar. Gold is priced in dollars, and as the dollar weakens, it takes an increasing amount of fiat dollars to buy an ounce of gold…Beginning in 1999 gold started up in a primary bull market. In my personal opinion, this is fated to be one of the greatest bull markets in history. It will be a bull market built on not one, but two powerful human emotions -- both greed and fear. The speculative third phase lies ahead. Slowly but surely, the US public will finally realize that the US government is bankrupt both morally and monetarily. People will panic into gold…I believe that there will be a world panic to buy gold. This will set off one of the wildest and most explosive bull markets in history.”

There are a several fundamental variables to support Russell's comment.  Let me just say that all these bubblevision "experts," who get on t.v., or pen commentary in the Wall St. Journal, and cite declining jewelry demand or industrial demand as reasons why the price of gold is at a top and going lower, have absolutely no clue what they are talking about - in fact, they look like absolute idiots to those who do (see the recent article by Dave Kansas of the Wall Street Journal. I am in shock the WSJ published such sloppy, incompetent reporting).

I will address all the reasons why gold is going much higher in future blog posts.  But I would like to say that, based on evaluating a lot of evidence that has been brought to my attention from some people who are in a position to know the facts - plus my own recent experiences in dealing with gold and silver deliveries from the Comex - there is a rapidly growing problem with the ability of three or four big banks, who are short Comex and LMBA gold futures contracts in large quantities, to make good on the actual delivery of physical gold.  I am now hearing accounts of some large investors being offered cash settlement of their futures contracts at spot plus substantial premiums over spot.  In other words, there is a condition of "backwardation" in the gold market that is not evident to the casual participant.  This alone, if I am correct, will drive the price of gold substantially higher (and of course, silver will go up even more in percentage terms).