Central Planners Greatest Fear, Possible Surprises & Gold

Today Rick Rule warned King World News that the central planners’ greatest fear may be coming true, that their money printing is no longer having any economic impact and they are now pushing on a string.  Rule also discussed possible surprises going forward, Germany’s gold, and why he remains a strong buyer of gold.

Here is what Rule had to say:  “The action here in gold is not unexpected with the stronger dollar.  You will note that the major markets are off the last couple of days, as well as commodities and most peripheral assets.  But I continue to believe that buying bullion on weakness is a prudent thing to do, and probably a profitable thing to do as well in the one-, two-, and three-year time frames.”

“For those who like to accumulate gold, you need to view these price declines as an opportunity.  From my point of view, I am going to be a systematic buyer of gold until I see the system begin to heal itself, which leads me to believe I will be a buyer for a long period of time.

One of the many bullish factors for gold are the problems in South Africa....

“I think the situation in South Africa has a long, long way to run its course.  So this is going to be a very interesting set of circumstances for the gold market going forward because it is hurting production.

I would also add, Eric, that one of the interesting things I am seeing right now is the continued bifurcation of the mining market.  The sort of segregation of strong companies and weak companies.  One of the things I notice is there is no cash being made available under any terms to a lot of the weak companies.  This continues to support the thesis that this market purge will be real, and many of the weaker companies will be delisted.

At the same time I am beginning to see that the smaller companies, at least when they finance, aren’t financing through the broker-dealer community, but rather they are financing on a non-brokered basis.  This is also taking place with very, very strong insider buying.

That type of activity is extremely useful.  It’s showing us the people that work at these quality companies think that it’s cheap enough to take money out of their own bank accounts and put it into the company’s bank account in return for increasing ownership of the company.  This augers very well for a pretty solid first quarter rebound in the stronger companies in the junior sector.”

Rule also added:  “We are seeing revenue declines from big US companies.  This is not sustainable for the long-term.  I think if that continues through the rest of this earnings season, then we might have a surprise downside in the equity markets.  I myself have been rather surprised that the amount of liquidity that has been put in to the system didn’t generate more short-term impact. 

But Austrian economists have been predicting for years and years that eventually the Fed would be pushing on a string as they put more liquidity into a market that couldn’t absorb it.  That may be what’s happening now.  It will be very interesting to watch this development going forward.”

Rule also had this to say regarding Germany auditing and looking to repatriate its gold:  “It makes perfect sense that Germany would do that.  What’s the point of having a political insurance policy that’s under somebody else’s control?  It doesn’t make any sense at all to me.  If I represented the German people, surely there must be some secure place in Germany where they could store their gold.

Sure, they could leave 5% of their gold holdings in New York to handle international settlements, but as to the country’s store of wealth, their gold, by all means Germany should store it in their own country.”