Gold Will Shine in 2009

For most of this decade almost all of the so-called financial experts, the financial media, and politicians have gotten it wrong. They either have not understood what is happening in the financial markets or they have been lying (or both).

With all the financial turmoil so far since the middle of 2007, what can we look forward to in 2009?

The financial crises and subsequent bailouts are becoming more frequent and exposing greater losses. If you look at these series of crises as being caused by implosion of the credit derivatives markets, a lot of what has happened makes sense. This concept also means that these crises are not even halfway to being reflected in the financial markets.

As a consequence, expect 2009 to bring even greater bankruptcies and financial bailouts than we have seen so far.

The bailouts so far are large enough that they will mandate that the U.S. government (and others) either raise taxes or destroy the value of their currencies by expansion of the money supply. Any further bailouts in 2009 will simply accelerate these developments. As governments compete to lower the relative value of their currencies, that leaves gold and silver as the preferred safe havens.

In the past few days, at least one major buyer of gold has been active on the Comex. This activity is entirely contrary to normal trading patterns. In trying to make sense of this, perhaps the most likely scenario is that this major buyer already has a substantial gold position and sees an opportunity to take advantage of growing currency and financial market weakness.

Could this be the event that finally triggers a major surge in gold prices (dragging silver along with it)? I don't know. It also doesn't matter! There are so many other events in the immediate horizon that could trigger a major jump in the price of gold that it doesn't really matter precisely which event or which day is considered to be the breaking point.

Other possible short-term triggers that could set off a major rise in the price of gold include:



" Reaction to Saturday's announcement by Venezuelan president Hugo Chavez that his government would seize several gold mining concessions from private operators.
" Continued sharp drops in the value of the U.S. dollar.
" Possible bankruptcies of Citigroup, J.P. Morgan Chase, AIG, or Bank of America.
" Major military actions, with India/Pakistan or Israel/Palestine being just two possibilities.
" Possible revelations by a government or the International Monetary Fund that previously reported substantial gold reserves that it no longer has all the gold it claimed.
" Possible revelations that one of the "paper gold" alternatives such as certificate programs by the Perth Mint or Canadian government or gold exchange traded funds do not have all the physical gold on hand to cover their commitments.



This list is not all-inclusive. I am also not trying to cast aspersions on any particular government or company, but am highly suspicious that one or more have unrevealed financial bombs that will explode in 2009.

In my judgment, we are close to the time when demand for physical gold (and silver) will soar to levels never before seen. How close? It is entirely possible that it could happen in January. I expect major moves by April at the latest. By the end of 2009, I would not be surprised to see gold top $2,000. If all chaos breaks out, that figure could be conservative.

When the price of gold breaks above $1,000 to stay, I expect supplies of physical gold to become almost non-existent.

Today, you can still purchase many forms of physical gold, for immediate delivery, or delivery in 2-4 weeks.

The U.S. Mint has announced that it will not be manufacturing any 2009 half, quarter or tenth-ounce gold American Eagles or any gold Buffaloes in the near future, but many other coins and ingots can be purchased. If you procrastinate, I think it is likely that the price will be higher and you may find physical gold almost impossible to acquire. If you are contemplating acquiring gold, I think you will be better off acting sooner rather than later.



Patrick A. Heller is the owner and general manager of Liberty Coin Service, and author of the newsletter Liberty's Outlook. See www.libertycoinservice.com.