Gold, Minimal Downside, $12,000 Upside

kingworldnews.com

With continued volatility in gold and silver, today King World News interviewed acclaimed money manager Stephen Leeb to get his thoughts on gold, silver and where he sees things headed. When asked about the reaction in gold Leeb responded, “Yes gold is down about $50 and it’s down about $120 or $130 from its high, but that’s only about 7%. That’s not even a serious correction, that’s just a reaction in a bull market. The other thing to point out is that nothing has changed, if anything things have gotten worse.”

Stephen Leeb continues:

“This morning we were greeted by an absolutely terrible number on unemployment insurance claims. Let’s face it, when push comes to shove, that’s the number that really counts. That leads us into the Fed meeting next week. I think it’s almost a done deal, if not this meeting, the next meeting, that we are going to engage in QE3.

More money is going to be printed and that’s really the driving force behind gold. You will obviously see the Europeans printing more money, but you are going to see us printing more money.

This morning, when I got up, a chart greeted me and I look at it in almost disbelief. The sources are the IMF and another credible organization and what it shows is that US gold reserves as a percent of monetary base now stand at about 20%. At their high in 1980 it stood at 120%. Just to get to 100%, gold would have to rise to about $10,000.

Looking at this (historical) chart, 20% is close to a low. Gold, despite its dramatic bull market to date, has not kept up with the kind of inflationary pressures that we’re building in this system. Another piece of data that came out this morning, the CPI (inflation reading) was 3.8%. We’re flooding the system with money when you have inflation above its 40 year average.

This is kind of an ideal market for gold, but maybe there is a little profit-taking on the news, maybe people want a little bit more liquidity. The one thing that I can say, Eric, is that this bull market is not over....

“Nothing has changed, other than the price going a little bit lower. If you loved gold at $1,900, you should love it even more at $1,780 and if it gets down to $1,680, which is possible, you should just back up the truck and take a trip around the world. I think the correction you have seen in this is not meaningful and it is counter to what remain terrible, terrible worldwide fundamentals.

A world that has to look to what was formerly a third world country, China, to perhaps bail them out, what is this saying about the developed world? It’s saying that we’re shot, we’ve turned over economic hegemony to the Chinese, we’ve already done it.

If you’re under those conditions, are you really going to place a large bet on the US dollar? Are you going to bet on the Euro? No, no, so when you get a situation like this, I think we had about an 8% or 9% correction in gold three or four weeks ago, they don’t mean anything unless the fundamentals have changed. Unfortunately, really unfortunately, for the US and for everyone else, there have been no changes at all.

I call this a great buying opportunity. At most you are looking at 5% risk from here and the upside (for gold) could be as high as $10,000 or $12,000.”