EUROPEAN CENTRAL BANKS ADD GOLD TO THEIR HOLDINGS

Gold opened higher and then moved to about unchanged levels in the first half-hour of trading. Silver likewise was higher, but gave up the early gains on profit-taking. The dollar is down 65 basis points at 85.42 and oil is up $.40 at $40.46 a barrel. The Dow is up 29 points at 7,966.

For the first time in about eight years, the European central banks actually added gold to their holdings. Their gold reserves were up 1 million euros for the week. At the same time their foreign exchange reserves fell 38.1 billion euros. That is a surprising development and is indicative of the fact that central banks have lost their appetite for selling gold and have an increasing appetite to acquire gold in preference to dollars. The amount of dollar reserves may be declining in most central banks, as they are concerned about the U.S. government's ability to repay its debt. Moreover, with the bailout package and the stimulus package likely to add trillions of dollars to government debt, it is highly unlikely the dollar can sustain this kind of pressure for very much longer. I noted that interest rates on short-term treasuries increased from nearly zero to .25%. That again, is indicating that perhaps there is more desire for gold as a safe haven than treasuries.

Some analysts think gold will continue to range trade for the remainder of this week, building a base from which to attack the resistance at $930 an ounce. Yesterday, the analyst for Dow Jones Wire Service said they believe gold will breakout above $930 in the near term and that once a breakout occurs it will rally above $1,000 in a matter of weeks. That certainly would be consistent with the forecast of other analysts including Merrill Lynch, which thinks gold will be $1,150 before June. One of the reasons range trading is expected is that traders are awaiting the decision of the European Central Bank on Thursday. While it is widely expected they will continue to maintain an accommodative monetary policy and hold rates low, nevertheless it is a factor that could influence the market and caution prevails as a result. One thing is clear: safe haven demand for physical gold is strong.

The Fed announced today that it is extending all of its lending facilities to October 30th, from their anticipated expiration in April. That means the Fed is expecting the banks and financial institutions to have continuing need for capital through October. As President Obama said yesterday, the financial system isn't likely to show any progress until the end of next year.

National Chain Store sales fell 2.7% in the first four weeks of January versus the previous month. This again demonstrates that the economy is weak and the need for stimulus is certainly real. The more stimulus that comes into the market, the lower the value of the dollar, and the higher gold should move. All of these factors are among the reasons that investors are turning to gold for safety, protection of purchasing power, and protection against the debasement of the dollar, which will ultimately lead to rising inflation pressures.

Yesterday, Merrill Lynch put out a strong buy recommendation on gold pointing to protectionists tendencies that are rising rapidly. They sited protectionism and growing geopolitical problems as among the many reasons why investors are diversifying into gold for safety. Most of the safe haven demand for gold comes from countries other than the U.S. That is because people in the U.S. do not understand currencies and do not understand the factors that influence the value and buying power of their savings. If American investors understood these issues better, the demand for gold would skyrocket. I believe in time, the middle class of our country will begin to understand that they are being systematically ripped-off by a declining dollar. The decline of the dollar has persisted for decades. Now that decline is accelerating as confidence in the currency is being lost on a global basis.

These are all very substantial reasons to diversify into gold. To learn more about these types of developments and issues and to receive copies of the recommendations and quotes from Merrill Lynch and other, call Goldline at 1-877-341-2646. Goldline is also giving away as part of the free information package the interview that I did with Frank Barbera. He is a prominent analyst and has been a technical analyst for several business TV stations as well as a fund manager and investment advisor. You should listen to his comments about the problems that have developed in our country and the world and the most likely solution to those problems. He also gives his forecast long-term for the precious metals that I think you will find to be somewhat astounding. This is a respected analyst who believes gold will be over $1,200 an ounce this year. If you called last week for a free information package, be sure you call again to ask specifically for the Frank Barbera CD interview. Clients should also call for the free CD and the new articles we just put into the free information package. This is very helpful information that will give you a great deal of confidence in the precious metals sector. Call Goldline at 1-877-341-2646 today to get the free information package.

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If you would like to take advantage of the Price Guarantee Program, which provides you with a two-week window of opportunity in which to re-price your order in the event of a correction, you must select assets with some collectible value such as 20 Francs, Double Eagles and Silver Dollars. Call Goldline at 1-877-341-2646 for further information on the Price Guarantee Program and how you may be able to receive free coins.

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