With Gold continuing to surge, now trading above $1,900, today King World News interviewed James Turk out of Spain. Despite the fact that European stock markets are tumbling between 3% and 5%, gold remains a pillar of strength. Gold has very recently divorced itself from various asset classes such as the US dollar, euro and major stock markets.
Regardless of how those asset classes trade, gold continues its relentless climb. When Turk was asked about the incredibly powerful advance gold has been experiencing he responded, “This brings up a point, Eric, that we have been discussing recently. A lot of people have been comparing today’s problems with those leading up to the Lehman Brothers collapse in September, 2008.”
“They have been fearful that when the next major stock market downdraft occurred that gold would be taken down along with it, just like what happened in the aftermath of Lehman. We’ve discussed the fact that the Lehman collapse was a liquidity crisis in which everything was sold, even the highest quality assets, like gold, were sold because of the liquidity they offered.
But what’s happening now, Eric, is not a liquidity crisis. Everybody learned the lesson from the Lehman collapse to be liquid and control their use of leverage, particularly the big hedge funds. So I want KWN readers to understand the major difference between then and now is that the principal driver today is not a rush to liquidity, but rather, a rush to safety.
“Consequently you are seeing gold climb higher, even while stocks in Europe are suffering a bloodbath. This is a historic watershed moment in gold’s bull market because investors globally are finally coming to the realization that gold represents the ultimate safe haven. And more to the point, that gold is one of the only assets on the planet that avoids counter-party risk.
This is an important point, Eric, investors selling stocks are not just attempting to flee the stock market, they are also fleeing the euro and the incredibly fragile european banking system. As money flees Europe, we are seeing a bit of a knee-jerk reaction with some of that hot money going into the dollar, but more importantly we are seeing tremendous money flows into gold.
So going back to our discussion on Thursday, I expected the buy orders for gold and mining shares to roll in this week after everybody returned from the three day weekend. That looks almost certain now given what’s happened today here in Europe.”
These are truly historic times as investors continue to flee the carnage of paper assets (being destroyed by currency debasement) and this secular bull market in gold enters the recognition phase. The gold bull market is in its second phase now and KWN readers need to know that second phases are the longest and strongest phases of a bull market.
This is why gold’s relentless upside advance continues to surprise so many market observers, they don’t understand the power of phase II. The manic phase III lies in the distance somewhere. At that point the masses will be buying and the gold mania as Jim Sinclair said, “Will light your hair on fire.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
