Gold Bull & Germany Flirting with Depression

kingworldnews.com


With gold trading lower by almost 3% and silver off more than $1, today King World News interviewed acclaimed money manager Stephen Leeb, Chairman & Chief Investment Officer of Leeb Capital Management. When asked about the action in gold, Leeb responded, “It doesn’t make a lot of sense to see the world coming apart and gold going down. We are seeing liquidation by some hedge funds and maybe even banks to some extent that need liquidity. You have to go back to 2008 and I think the drop in 2008 was probably in the neighborhood of 30% and then gold just started taking off again.”

Stephen Leeb continues:

“The catalyst after the drop in 2008 was recognition there were problems that had to be solved by extraordinary means. And once that was recognized, gold just shot up like a missile and really didn’t look back. I think this is probably a similar kind of correction, except now it’s not the US financial system that is in peril, it’s the eurozone that’s in peril.

The treaty or so-called treaty they struck last week is a joke. To assume countries that have been fighting for 300 years, and share absolutely nothing culturally, are suddenly going to come together and sign a piece of paper and all agree to think alike, it’s crazy.

What I think will happen, one way or the other, is Germany will decide it’s going to have to print money. That’s really the only way out. You have to have growth or you are never going to get rid of these deficits.

People can only cut back to a certain extent. If they start cutting back on food and energy you impoverish the entire population. You are seeing some of that in the US right now. A large portion of our population in the US is spending over 50% of their money on food and energy. Clearly the numbers are high in Europe too....

“What’s remarkable here, Eric, is the Germans have this long-standing inflationary fear. We all know it stems from the 1920s and the hyperinflation during the Weimar Republic and the wheelbarrows of money, etc.. But it wasn’t the hyperinflation in the ‘20s that laid the foundation for Hitler, that wasn’t the catalyst for Hitler. It was the depression in the 1930s, the protracted depression that made possible the rise of Hitler.

So the Germans are really flirting with the same kind of situation that occurred in the 1930s. If Europe continues to sink and the Germans don’t relent on this stuff we are going to head for a real deflationary depression.

My big picture is that Merkel and the Germans will allow the printing of money and once that happens, just as it happened in 2008, once you get a sign, that’s blastoff time for gold. Gold and silver will shoot up like rockets. In my opinion gold will close 2012 at $2,500 or above, probably above. Gold could easily double from here in the next 12 months if you get the kind of money printing that I expect to happen in Europe.

So how low gold will go here is literally meaningless. My advice to investors is don’t try to catch a bottom and be a hero. It could happen any time. It could be happening as we speak, it could be happening today. But it’s really irrelevant. Let’s say gold is at $3000, $4,000 or $5,000 in three or four years, which I think is very, very likely--are you really even going to remember that it went to $1,650 or $1,550? No.”