SILVER UNDERVALUED COMPARED TO GOLD

Gold was up solidly in the pre-open and then pulled back on early profit taking. In the first half-hour of trading, it is still up $1 and silver is up $.26. The stock market is rallying with the Dow up 77 points after the government released the details on its housing bailout program. There will now be a uniform standard for lenders and borrowers to utilize in lowering monthly payments and principal. Whether this is an effective program remains to be seen. However, the combination of that plus the fact the Fed will be pumping $1 trillion into the credit system to make money available for consumers, business and other types of loans, should be significant. One trillion dollars is about 1/3rd of the entire amount of consumer lending that was done in the year 2007. It is a substantial amount of money. The dollar is up 15 basis points at 89.06 and oil is making a substantive move today, up $2.48 at $44.13 a barrel.

While gold is rallying nicely, some still think it will re-challenge the $900 level, and perhaps even dip slightly below that. If this were to occur, it certainly would clean out the latecomers and leave gold in more secure hands. Many are now turning to silver as an alternative choice, as it has lagged behind gold and is overdue for a substantial up move. Jim Cramer said yesterday that he really likes silver because it is undervalued compared to gold. He said since 1960 the gold to silver ratio has been about 52 to 1. Today it is about 70 to 1. That silver could be very undervalued compared to gold and may post large percentage gains as it plays catch-up to the traditional ratio.

The ADP unemployment statistics indicate that 697,000 jobs were lost in February. Statistics like that should keep the government scrambling to jump-start the economy. In line with the employment data, the Dow Jones Wire Service reports, "The latest disturbing data suggests the U.S. economy may have suffered a sharper correction earlier this year than in the previous three months, Federal Reserve Bank of Dallas President Richard Fisher said Wednesday. Fisher cited the 6.2% shrinkage in U.S. gross domestic product in the last quarter, and said indicators in the past months suggest U.S. activity could be "on track for decline of roughly the same or greater magnitude" in the three months to March." Statements like this indicate the Fed will remain very accommodative and continue to pump up the money supply. If we look back through history at the dire warnings about the tremendous escalation of U.S. government debt and money supply, it becomes apparent we are perhaps at a point where confidence in the dollar will continue to be lost on a global basis. Some are reporting rumors that China and other central banks are aggressive buyers of gold and attempting to reduce their holdings of dollars. One article from Commodity Online says China will buy $93 billion worth of gold to hedge its dollar holdings.

In this environment, one would think that people will continue to move to the safety of gold. We must remember that gold is an asset that offers protection in times of deflation as well as inflation. It is a crisis hedge. That is why so many people around the globe are moving into gold. It is the reason why people like Jim Cramer, David Tice and others are strongly recommending that people buy gold. It is the reason that Merrill Lynch says that everyone should own some gold. As a matter of fact, David Tice on Bloomberg TV said this morning he sees gold rising above $3,000 an ounce. Clearly, once this period of correction and consolidation is over, prominent analysts think gold will continue to move higher, taking out the $1,000 level and moving into new record highs. The Street.com said yesterday, "Over the longer run, gold has been a reliable store of wealth. … gold can be found, but gold cannot be "created." Thus, the scarcity value of gold – especially in an era where politicians create money out of thin air. And that, essentially, is the argument for owning some form of gold in your portfolio … many feel that gold is a wise investment at a time when government is creating paper money out of thin air. They remember it was only 37 years ago, enough time for a generation to forget, that foreigners decided they didn't want to hold U.S. dollars."

These are prominent analysts at prominent firms who are well respected. They are recommending that their best clients acquire gold as a diversifier. I think everyone should have some gold in their holdings. To get started, call Goldline at 1-877-341-2646. Be sure to ask them about the special offer where you have a choice of free shipping or the utilization of Goldline's Price Guarantee Program, which provides you with two weeks of price protection, which may be of assistance in this market.

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