RCM Editorial: Gary Comments on The Future of Gold Prices

Gary Rosenthal, Principal at RCM-

The article below is much more than a treatise on the manipulation of gold prices. It is a detailed explanation of the bailout money flows between the Fed and the banking system. The author makes it very clear how the Fed has liquefied the banking system to be able to fund the forthcoming $1 trillion plus Obama infrastructure spending program (see previous blog entry). Very little of the bailout funds are ever going to find their way into the housing market. However, the most important part of this article is the author's documentation of Bernake's plans for the role of gold in the reflation of the U.S. economy. We don't want to steal his thunder but here is a snippet to wet your appetite...

"Anyone who reads the written works of our Fed Chairman knows that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of most prior Fed Chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman. He often extols the virtues of former President Franklin Roosevelt’s gold revaluation/dollar devaluation, back in 1934, and credits it with saving the nation from the Great Depression."

This article should relieve you of any doubts as to why we maintain precious metals as a major pillar to our core investment philosophy in Fortune's Favor I. For clients who wish an even greater exposure to precious metals we would call your attention to the Fortune's Favor Precious Metals Fund, where your management team maintains significant personal exposure.

The full article can be viewed here.

A follow up by James West of Seeking Alpha:

Disregard the spot price as quoted by COMEX for a moment. Demand for physical delivery from futures contracts traders has risen from a traditional average of 1% to over 16% last Friday, and the price of gold for delivery in the future is cheaper than the spot price is now – a situation known as backwardation, and indicative of traders preferring retaining gold in favor of a paper profit. It is symptomatic of a confidence crisis building in the ability of COMEX to continue to deliver physical gold.

If COMEX does end up in default, the suppressive influences will be severely encumbered, if not completely overthrown, and the result may be the breakout of gold that has long been anticipated....