EYE ON GOLD

Gold has not been doing what many expected. The dollar has held up surprisingly well, the markets are running away and stability has come back to the market as the VIX (Chicago Board Options Exchange Volatility Index) sits close to a year low. Remember that the VIX is generally the standard for monitoring volatility across the markets. On October 24, 2008 (during the crash) the VIX hit an intraday high of 89.53 and over the past 6 months has stabilized and now sits at 25.01.

Why is Gold not plummeting in value as fear resides and equities and the US dollar provide seemingly much more profitable investments?

One reason. The smart money knows that inflation is coming. They don't know exactly when, but they know that when it hits, gold will have its day and there will be extensive profits to be had. This forward thinking has kept gold above $900 an ounce despite the markets giving it plenty of reasons to drop below that mark.

There is an internal battle going on right now between deflation and inflation. At some point inflation is going to take over. There has been too much paper money printed over the last year to stop it. Hyper-inflation and at least severe inflation will have a definite chance of occurring at some point in the next few years.

A staff member at Pinnacle found a very interesting quote a few days ago. We'd like to share it with you.

"Gold is like an unfaithful wife. One day it follows the dollar, one day it follows oil, one day it follows stocks." Leonard Kaplan, President of Prospector Asset Management in Evanston, Il.

We all found this quote humorous, but very true of late. Gold has simply been ignoring its long-time characteristics as a commodity which thrives on negative news and fear. It has been holding steady and even increasing in value during this 5 month long rally.

Gold doesn't want to miss out on this rally. It has been trading between $920 and $960 for months. Historically, this is an exceptionally high valuation and needs to be studied and watched closely. Gold is waiting for its opening. Consider how much money has been printed and injected into our economy through bail outs and stimulus in the past 10 months. The number is in the trillions. Several trillion dollars cannot be injected into our financial systems around the world and then one day taken out without any consequence. As an investor you have to understand this.

A few weeks ago we had one of our top authorities on the subject interviewed by our staff and delivered it to you in a Volume. Feel free to read the Weekly Volume titled, Interview With Mark Leibovit if you haven't already.

Right now gold is a dark horse. It is waiting in the shadows for its moment to step back into the limelight. Don't take your eyes off of gold and the indicators which surround it. Expect an update on gold and a more detailed approach to profiting from this metal in the near future. Like all great investments, it will be timing and patience that determine your success.


All the best with your investments,