Ron, I've followed Dr. Yardeni very closely over the years and I am basically in agreement with his analysis, with the exception of his bearish view concerning Crude Oil. If his analysis becomes Reality, it has extremely bullish implications for Gold:
1) A long bond yield of 4.5% this year and 3% in the year 2000 makes Gold very attractive as a CURRENCY and alternative investment.
2) In an extremely deflationary economy where the U.S. is in a major recession( to say the least), the dollar will fall substantially. I envision an International Currency Crisis; and with the Fed Radically easing the Discount and Fed Funds Rate, your lighting one of the biggest fires and playing the sweetest music for the XAU. Greenspam would have to lower rates to at least 3%. The last time Greenspam did that in 1993, Gold rose to $424.
3) Where I disagree with Yardeni is over his bearish stance on Crude Oil. The API reports have been very bullish lately. I also see most of the large oil well heads at severe risk due to embedded chip problems. At best, I see $40 oil and rationing of crude oil as we had in the 1970's. That gives us STAGFLATION, the best possible environment for GOLD. In this environment, Gold would challenge its old high at the $850 level and probably surpass it on the way to $1,000 an ounce.
4) What makes Yardeni interesting is that he has an excellent track record: Basically, his analysis has been on the money over the last 15 Years.
Gold looks like a screaming buy here. I won't attempt to pick a bottom here; but the risk/reward ratio is drastically slanted to the upside. There have been rare similar manias in past history; in all cases, those who kept their heads while everyone else was losing theirs won BIG in the end by buying Gold and select Gold Mining Shares. |
