Gold Moving Again!

Gold hit around $640 on January 2nd. Then after a drop below, it has been above $640 since the 23rd. It is now at $643.80. To really move much higher, it will have to break above $650 and then on to establish new records above $670.

Most of the mining stocks are above their recent lows. Though DRD Gold (DROOY) has been held back in price by the recent bad press, I am still holding mine. It has recovered from the recent lows and is now trading at about $0.80. The silver stocks Pan American Silver (PAAS @ 28.26) and Silver Standard (SSRI @ 33.32) are holding very well. It seems that silver is continuing to be stronger than the gold. I believe that gold is still under pressure from central banks and governments who cannot risk public discovery of the loss in purchasing power of the artificial paper currencies.

I have placed stops on a portion of my mining stocks. Most are 15% trailing stops. This is protect against substantial drops in prices and yet move higher to protect profits.

There is more news, almost daily, of more banks moving out of dollar reserves into EUROs and some into gold. The latest reports have been from the mid Eastern nations. Though the beginning is small, there seems to be an acceleration in the displacement of the dollar as the preferred reserve currency. This will lead to a lower standard of living for us.

The order of my preference for precious metal investments remain, as always, the bullion coins, the ETFs and trusts, such as, CEF, mining stocks, and other natural resource stocks. Following that there are stocks which pay high dividends and in my portfolio such as, Aberden Asia-Pacific Income Fund (FAX), ACM Income Fund (ACG), and San Juan Trust (SJT).

Study and learn all you can about investments. Remember, you are the one with the most interest in your own investing success.

Learn well, plan well, commit your plans to the Lord, and depend upon Him for the success. Earnest, sincere prayer to the Sovereign Lord of all, at every step in investing and in your life will yield success. We, Christians invest for the future to enable our future generations continue the kingdom work of Jesus Christ, The Lord.

Best to each, Doug

Dollar Headed Down

I have been procrastinating on posting of late. There is a good bit of news which is turning into bad news for our dollar. Here is some of the latest from the Daily Pfennig (Everbank World Markets - www.everbank.com).

"Ty Keough pointed out an article yesterday which appeared on Bloomberg.com with this headline "OPEC Dumps $10.1 Billion of Treasuries as Oil Tumbles". It looks like OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble. Over the last several years, the big oil exporting nations have purchased massive amounts of US debt with the Petrodollars they have earned from record high oil prices. As oil prices have sold off, these countries have reduced their holdings of US treasuries. According to the Bloomberg article, for every $10 drop in the price of a barrel of oil, OPEC members adjust Treasury holdings by about $34 billion.
When you combine this reduction of available 'petrodollars' with Asia's focus on diversification it does not bode well for the US$. Last year, the Asian monetary authorities, together with the central banks and state investment agencies in oil-exporting countries, bought about $770 billion in foreign-currency assets. These official purchases financed most of the estimated $870 billion US currency account deficit in 2006, according to research by the Federal Reserve Bank of NY. If the petrodollar surpluses dwindle, the job of sustaining US consumption will fall squarely on the Asian central banks who have already stated a desire to reduce exposure to the US markets. This is not shaping up to be good news for the US$!"

We are also seeing a gold revival following the recent correction. For the last 24 hours gold hit a high of $643.20 and a low of $632 yesterday. It is currently at $643. Thus, it seems increasingly more important to hold on to precious metals, mining stocks, and the ETFs or other funds which invest in the precious metals to preserve purchasing power.

Almost all of the mining stocks have gains. It might be well to put in some 10-15% trailing stops on those in your portfolio with big gains. This will preserve much of the gain and give opportunity for further gains.

DRD Gold (DROOY) is still languishing a bit from the recent bad news. Hopefully, this is over for now and it will begin to have greater favor in the market. By the way, have you seen how Silver Standard (SSRI) has remained above Pan American Silver (PAAS). For a long while the prices were reversed. About 12-18 months ago SSRI put a good bit of cash reserve into the metal. I wonder if that does not explain the difference.

The outlook for the "new" Congress is still unclear. I am glad that I am not in any major position in the government. I am perfectly willing to acknowledge that the Lord Jesus Christ is in control. His are perfect hands as is His exercise of control. Take great comfort in this as man makes many mistakes in arrogance while our Heavenly Father sits back in derision at the folly of man.

Best to each, Doug

Gold Holding Firm Above $600

It is very encouraging that gold is holding above $600 in spite of a temporarily stronger dollar. Gold is presently at $619.20 up some $5+ for the day.

The mining stocks are up. DRD Gold (DROOY) is trading at $0.83 from a low of $0.78 just days ago. The problems with Emperor Mine, of which DROOY owns a large percentage, are still persisting. We should hope for a resolution very soon. This is still a good company and I am holding.

The Central Fund of Canada (CEF), invested in gold and silver bullion, is now at $8.90. It is not a bad buying price for some who do not have it in their portfolios. It was as high as $10.23 on November 27th. and will return there and beyond as the price of gold increases. This is a core holding for me.

Both Silver Standard (SSRI) and Pan American Silver (PAAS) are holding well, too. These are great silver companies. I own SSRI and trade in options on PAAS from time to time. By the way, it does appear that silver may well out pace gold on a percentage basis for the near term.

Remember that there will be bumps and sandy places along the road to higher prices. Therefore, it is wise to keep stops on a portion of the mining stocks in a portfolio. I expect prices to move higher soon and I will be placing stops on some my mining stocks in the near future.

The dollar is stronger today. However, it remains a troubled currency with central banks shifting from the dollar to gold and Euros. Mid-East oil in Euros seems to be coming to fruition shortly. That will/would be a blow to the dollar. Think of trading that much oil in Euros and not dollars. If that thought does not drive you to the reality of the downward trend of the dollar, nothing will.

Look well after your holdings, but depend upon the Lord for success. It is He Who gives the power for success. Amazingly, He also uses failure to guide His people into better actions. Place the Lord Jesus Christ first in your life. In fact, He must be so far above everything else in your scheme of priorities, that all others appear as being hated by comparison.

By the way, the week end is here and it is time to prepare for corporate worship on the Lord's Day. Do not neglect this as is the practice of some.

Best to each, Doug

2007 is well under way!

The household debt accounts are all over the internet now. If you have not found them, here is a recap of the disaster waiting to happen:

1999 2006

Household Debt $ 6.4 Trillion $ 12.3 Trillion

Mortgage Debt $ 4.4 Trillion $ 9.33 Trillion (Second Quarter of 2006)

Consumer Debt $ 1.6 Trillion $ 2.4 Trillion

These are staggering figures. Remember that inflation is "An increase in the amount of un-backed currency in circulation." This results in price inflation which is commonly referred to today as simply "inflation." Upon examination of inflation, it is obvious that true inflation cannot be created by companies raising the price of their products, by workers demanding higher pay, or by consumers spending too much. Rather, inflation of the currencies of the world can only be created by central banks and governments who control those FIAT currencies. Central banks and governments increase the amount of un-backed currencies in circulation by printing their FIAT currencies and through the fractional banking system by increasing the available credit. With these facts in mind, examine the increase in un-backed dollars in circulation from only the increase in the household debt level.

Using only this, we can see an increase of almost 6 trillion dollars over the six years. Wow, that is a lot of inflation! Add to that the staggering debt of our governments in America and we are treated to an inflation of dollars never before experience in the history of the world. In fact, it is very likely that this increase of debt exceeds that of the total of all the debt of the many previous years summed together. Thus, we are in un-charted waters and should be, but will not be seeking a graceful way out. We will find that there is no easy way out.

Looking at Economics 101, consumer spending does not create wealth. This is particularly true when the spending is done with borrowed dollars, as is the case today. Even in the re-financing of housing, much of the dollars taken out were used by consumers to live beyond their income level for a temporary higher standard of living. The dollars which were received, were consumed and gone. The result is a great deal of liquidity in the nation today. Almost all of it came from debt.

This liquidity or inflation of the number of dollars in circulation has to go somewhere. Discounting that which was and is being consumed, much is floating around into "investments." Typically, this liquidity flows into first one sector of the market creating rapid price increases in that sector until the bubble gets beyond the ability to long exist and the sector collapses. We saw that in the ".com" industries, in the general stock market, and in the housing industry in recent times. This is causing a few people to wonder about the lasting value of FIAT currencies.

They are looking for a more secure form of value. Tools, equipment, knowledge of technology, and facilities for producing salable products or services have lasting value. Historical true money has been silver and gold. It is true that silver and gold do not earn interest, but they have been a store of purchasing power for centuries.

Central banks and governments are well aware of the fact that where real money (silver and, particularly gold) is readily traded in markets, the people have a great deal of freedom. Thus, they continue in an attempt to discourage, or even forbid the citizens to own or trade using the precious metals. This threatens the FIAT currencies which they can control to exercise more control over citizens. Were we in America to realize this as well as much of the rest of the world, we would have been more thrifty and not sought the easy way to perceived success through substantial increase in our debt.

The debt threatens, particularly, the so-called " middle class" of working people. There will come a time when the earning will not be sufficient to service the debt. It may be that we are now entering the early stages of that period, as we see foreclosures on real estate increasing. You can recall in the early to mid-1980s and the severe drop in home prices. Many people simply locked the doors and moved away giving the homes back to the lenders. Nation wide the foreclosures were in the 1,000s per month in many areas. It can and very likely will happen again.

Inflation and spending binges will not end easily. At some time, it will be necessary to stop both. This is painful, but essential to restore credability and stability of currency. Whether the nations do this voluntarily or when forced to by a colapse of the currency, it will happen. Always has in the past and will in the future, too. The one coming will be the biggest ever experienced as we are well beyond any threat ever experienced.

Will 2007 be the year for restoration of the equilibrium? I do not know. In my very limited mind, I would have thought it would have happened years ago. Certainly, in the last few years. When, is the big question which will be answered in time.

You who read and understand this must feel an urgency about becoming very thrifty. Cut back your spending, reduce and eliminate debt, build a reserve of cash for emergencies, and think of the lasting purchasing power of gold and silver for investment. The mining stocks will boom as the inflation continues.

Think for yourself. Study and prepare. Remember, you are the one most interested in and responsible for your financial security and the proper training of your children. They, too, must be prepared for an uncertain future. Teach them that you may not know the future, but that you and they must depend upon the Sovereign God of all who has the future firmly in His hands.

He knows and cares for His people. As you prayerfully study the Bible, accept the words, and apply them to your life under the power of the Holy Spirit, you and your family will be led in the right direction.

May 2007 be the year of growth in the Lord for you and your family as you enjoy a year of great blessing.

Best to each, Doug

Precious Metals Score Another Profitable Year!

From James Turk's Founders Commentary found at the following website( http://goldmoney.com/en/commentary.php#current) we can read the following recap of precious metals. " Six Consecutive Years -- The numbers for 2006 are in, and gold has climbed again, its sixth annual increase in a row. Gold gained 22.8% for the year. Silver also had a banner year, climbing a stunning 45.3%. Gold has appreciated 15.5% per annum on average, while silver's annual appreciation during this period is 19.7%. "

Thus, the precious metals have once again shown to be valuable for preserving wealth in face of the depreciating dollar. In general, the mining stocks have not done as well as the metals, themselves, as they have suffered severe corrections from time to time. So, it can be seen that some of the Canadian (CEF) and the new precious metals ETFs have profited from their holdings of the metals.

The metals have shown appreciation in recent years against almost all of the paper currencies of the world. This reveals and should be understood that all of these currencies are simply un-backed paper. They have value only from their FIAT status and acquiescence or preference of people to use them.

There is another factor in the appreciation of the metal. I would suggest that there is a growing demand coming from the recent prosperity of the people of China and India. These are two of the fastest growing countries in the world in recent years. These and other Asian people understand the value of precious metals and are frugal, partly from necessity, but learned over many generations. They are very thrift conscience as their level of saving clearly reveals. Contrasted with the zero to negative savings rate in America, they are far advanced over us in thrift. Recall, that the high rate of savings in Japan greatly lessened the impact of the severe recession/depression in that country.

Savings is the basis for growing an economy while consumption is a recipe for disaster. As one can read in Clausen's The Richest Man in Babylon, one must not eat the children. He is referring to the consumption of increases in value of savings. He explains that rather than eat these children, one should let these children (savings profit) continue to earn even more in the future. Put them to work for you! Others have called this principle, "compounding". Through the process, your capital will increase over time much more rapidly than if you have consumed the increase from your savings and investments. It is a sound principle which the wise will follow.

The Lord has given each of us the New Year. It is a time for reflection, but also to look forward with renewed vigor toward learning more of the Lord's word and applying it more diligently in our lives. We must, not only be hearers of the word, but doers - immediately applying what we have learned. Make your new year's resolutions, if you want, but be not fooled. It takes diligence and persistence to follow through with them. If you truly want to make improvements in your life, commit to them with careful planning, commit them to Lord (Pr. 16:3 & Ps. 37:5,6), and then move forward to accomplish them step by step. As He fulfills your plans with success or by failure to direct you in a different path, give Him the praise and glory with great gratitude.

May each of you have a great New Year.

Doug