Richard Russell - Financial Crisis & The Bullish Case For Gold

"The Godfather of newsletter writers, Richard Russell, believes the ongoing financial crisis remains very bullish for gold. Here is what Russell had to say: “The nation is approaching the ‘fiscal cliff.’ This is a negative for the market. On January 13, Congress will have to vote on whether to increase the national debt, which is now over $16 trillion and counting. Fiscal cliff and debt ceiling are both momentous decisions for Congress, problems that they'd rather not face.”

 

Richard Russell continues:

“The stock market also has its problems. Last week the Industrial Average closed above its May 1st peak -- the Industrial move was not confirmed by the Transports. This leaves the stock market in limbo, and it leaves investors in a quandary.

My choice for an investment position is -- gold coins (bullion) and GLD and enough cash to pay your bills. If the Fed acts to stimulate the economy, it would be bullish for gold. If the nation goes over the fiscal cliff, such an emergency would probably be bullish for gold. If Congress fails to raise the debt limit, it should be bullish for gold (another emergency).

If absolutely nothing happens, the prevailing forces of deflation will kick in, and that would be bearish for all commodities and probably bearish for gold. But wait -- if the whole scene turns deflationary, that would be a situation that Bernanke would not tolerate (the Fed is terrified of deflation), and Bernanke would almost surely flood the system with truck loads of fiat money -- that would be bearish for the dollar and bullish for gold.

Big picture -- emerging nations are slowing down. China's economy is slowing, Europe is in recession, employment in the US has stalled and unemployment remands high. In the face of this, the world forces of deflation are continuing. The US could now be suffering long-term structural damage, as the Fed has feared. 

This all militates toward Fed action, but many question whether Fed action will do much good. The European Central Bank unveiled a bond-buying program last Thursday, and China announced major infrastructure projects last week.

 

The Fed can bull the markets, but it can't directly create jobs. During the Great Depression, the government created jobs through its alphabet agencies such as the CCC and the WPA. I wouldn't be surprised if the current government chooses that path again. In the meantime, the stock and bond markets are in a quandary. The trend, if there a trend-- where is it?..."

 

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/9/11_Richard_Russell_-_Financial_Crisis_%26_The_Bullish_Case_For_Gold.html