RCM Editorial: Paper Burning = Gold Buying

We have been writing for months about the unfolding credit drama. We have discussed the tsunami of redemptions and repatriation ad nauseam. We have highlighted stories about bailouts and ballooning government debt. We have discussed many ideas and tried to differentiate for you, the reader, which stories mattered and which were erroneous.

During all of the negative hysteria we have highlighted one extremely positive investment theme. In fact, highlighted may be too delicate a word. We have been on the mount, the soap box, the podium. We have preached, shouted and implored. Our message has been simple and clear: PAPER BURNING = GOLD BUYING.

Friday may go down in the history books as the beginning of the next leg up in the price of gold. The precious metal rallied in price over $50. I will spare you today and not launch into another lecture on the fundamentals of the gold move. I will however, remind you that in our opinion the only reason gold has not exploded higher in the last few months is the negative effects of the massive withdrawals from equity mutual funds and hedge funds. As we have expressed in previous missives, when we get closer to the end of the year the pressure from redemptions will ebb and one of the 1st assets to feel the positive effect will be gold. Friday's action may have offered us a glimpse at this new investment paradigm.

I have no doubt the road ahead may be bumpy. As we get closer to the end of the year volatility will continue to reign supreme. However, make no mistake about it: Gold will be a beacon of light in the midst of this financial storm.