Gold For Speculation Or Insurance – The Answer

Posted at 3:55 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Many people still do not get it. Gold is insurance against the consequences of the upcoming massive injection of liquidity into the global financial system.

This publication is not a tip sheet for the margin traders who each time gold goes into reaction mode love to send me emails, leave phone messages, screaming that gold is going lower.

My answer to these abusive callers is “so what.” Gold is going to trade at $1200 and $1650 regardless of the present reaction.

What is forgotten is that no one scalp trades gold and no strategy offers protection from the consequences of the Federal Reserve as the lender of last resort to the world.

Creation of all this money is not a wash and will much sooner than later pull the rug out from under the pre-election dollar rally.


Consider the fact that the Comex warehouse’s total gold holdings are under $5 billion when you read the following headline:
Fed would grant up to $540B to money market funds
Tue Oct 21, 11:52 am ET

WASHINGTON – The Federal Reserve announced Tuesday that it will provide up to $540 billion in financing to bolster the money market mutual fund industry, its latest effort to get credit flowing more freely again.

The Fed’s new program, called the Money Market Investor Funding Facility, will be used to support a private-sector initiative designed to provide liquidity, or cash, to money market investors. The Fed plans to back purchases of short-term debt including certificates of deposit and commercial paper that expire in three months or less from money market mutual funds.

The funds are large buyers of commercial paper and CDs, which historically are considered safe investments. However, the credit crisis, which took a turn for the worse last month, has put money market mutual funds under pressure as skittish investors demand withdrawals.

“The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests,” the Fed explained.