The Only Alternative Left is Gold and Silver

With news from S&P about negative watch on the AAA US credit rating and gold closing at new all-time highs & silver at 31 year highs, today King World News interviewed James Turk out of London.  Turk had this to say,“The big news today was the announcement by the S&P that they are putting the US government’s debt on credit watch with negative implications.  That announcement kept gold strong all day, but it couldn’t quite make it to $1,500.  Despite that, it still looks like we will be above $1,500 this week.”

Turk continues:

“The warning from S&P is unlikely to change the spending habits of Washington’s politicians.  Given the willingness of the Federal Reserve to monetize the government debt there is no major fundamental change in the outlook for the dollar.  If anything it’s a wake up call for the rest of the world that the rating agencies are starting to recognize the reality that the US finances are deteriorating so rapidly, it hardly qualifies any longer for its AAA rating.

Obviously Eric this is going to cause people to look for safe havens.  Given that there are no safe haven currencies anymore like there were in the 70’s when you needed to get out of the dollar, the only alternative left is gold and silver.  In fact the news about the University of Texas holding $1 billion of gold is clear evidence that market leaders are abandoning the dollar for the safety of precious metals.”

When asked about silver specifically Turk remarked, “Eric it is going from strength to strength.  Silver tried to correct today and for a brief while it was down almost $1 from the day before, but when the smoke finally cleared silver ended up on the day closing at a new 31 year high.  We are closing in on our $50 target and while I thought it was going to happen before the end of June, the strength that silver is exhibiting indicates to me that it could happen within a couple of weeks.

With the S&P announcement today it was an ideal time for shorts on the US dollar to cover and book some profits so they did.  This short covering bounce may last a few more days, but the fundamental outlook for the dollar remains bleak.  What the S&P was signaling is that the US government needs to dramatically cut its spending, but I see no sign of politicians in Washington mending their ways.

Although we can’t forecast how long this short-term counter-trend move on the dollar will last, the bottom line is that a spectacular waterfall decline is going to happen at some point.  As I have said before Eric, this event will shock the world leaving only those with gold and silver to weather the storm.” 

When asked about the underperformance of gold shares Turk responded, “It’s depressing to see the mining share action today with gold and silver putting in such strong performances.  But don’t let your emotions fool you and send you in the wrong direction.  Sometimes the markets really do try your patience and this is one of those moments that we are seeing right now in the mining shares.  KWN readers should continue accumulating the mining shares because at some point in the near future we will see a move that will be absolutely breathtaking.”

Turk was correct to note the underperformance of the mining shares.  As Pierre Lassonde said in his last KWN interview, the mining shares were already one standard deviation away from the mean and the situation has worsened since that interview.  Keep in mind that the mining shares will move from dramatic undervaluation to overvaluation and you will want to make sure you participate in that sensational price restructuring.  As Turk stated that move in the mining shares, “Will be absolutely breathtaking.” 

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