WALL STREET NOW SAYING "OWN GOLD"

The metals started lower but gold quickly turned around on continued bargain basement buying and safe haven demand. Gold is up $2 in the first half-hour of trading, while silver is down $.32. The dollar is down 96 basis points at 87.04 and oil is up $1.37 at $35.99 a barrel. The equity market is higher with the Dow up 42 points.

Today, I heard analysts on CNBC today talking about the potential for dollar devaluation. It is remarkable that on a network television financial program the analysts would actually be allowed to talk about formal dollar devaluation, but they were. Many were talking about the need to own gold as protection against that kind of event. In addition, one of the fund managers they had on the program, Dan Deegan, actually said people should own gold in the form of private gold coins. It is amazing how in the midst of a crisis the Wall Street crowd comes around to the obvious.

Owning physical gold coins is important at all times and should part of a properly diversified portfolio. Some analysts told Dow Jones Wire Service that there is a rising certainty of the $1,000 summit being scaled and soon. Many of the analysts believe $1,000 will be surpassed fairly quickly. The question is how much higher will it go in the short-term. It is not unreasonable to expect some correction or pullback. However, there is so much momentum on the upside and so much demand for gold as a safe haven that it could very well take out the previous all time record high without a significant correction.

One analyst, Mark O'Byrne told Dow Jones Wire Service that gold should rise even more sharply and target levels above $1,200 an ounce in the coming months, due to the burgeoning investor demand for the safe haven asset. Analysts also report that demand for physical gold such as coins and bars remains very strong especially in Western Europe.

Over the past few days I have discussed the fact that analysts are concerned about the collapse of Eastern European banks. Countries in the former Soviet block are hugely indebted to Western Europe's banks. They are now in a depression. What has been happening is that countries have been failing as a result of the collapse of their banking and financial systems. The IMF has bailed several of these countries out. However, the sums that are needed now appear to be beyond the limits of the IMF according to an article in the Telegraph Newspaper. They say the IMF has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland and Pakistan. Turkey is next on the bailout list and the IMF is fast exhausting its own $200 billion reserve. They said, "We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights." Lars Christensen at Danske Bank, said, "This is much worse than the East Asia crisis in the 1990s." He concluded, "The day they decide not to save one of these countries will be the trigger for a massive crisis with contagion spreading into the EU." They concluded, "If one spark jumps across the eurozone line, we will have a global systemic crisis within days." The article also said, "The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point."

These are very serious statements. Looking at the currency crisis in Russia and the repetitive devaluations they said, "This is the largest run on a currency in history." To be perfectly candid that article was frightening to me because I remember the history that the world financial system collapsed because of the failure of Credite Einsthaldt Bank in Austria during the Great Depression. While U.S. banks are not heavily exposed to Eastern Europe, the nevertheless are interrelated with the eurozone banks and this could have devastating consequences for all of us.

I note in yesterdays Wall Street Journal that many funds have been moving to diversify their portfolios with physical gold. These funds include the endowment fund of the University of Notre Dame, the nations 13th largest educational endowment. They have $90 million in gold. The Teacher Retirement System of Texas and Windward Investment Management, which manages more than $2 billion for endowments, pensions and high net worth individuals, had as much as $232.9 million in gold.

We must be mindful of the fact that this economic crisis is likely to get worse before it gets better. Yesterday, Fed Chairman Bernanke warned us of precisely that and indicated that before next year is over, we may see unemployment as high as 8.8% or more. The demand for safe haven gold is likely to continue for some time. At the end of the day, all of these massive bailout programs are likely to result in a debasing of the dollar and other currencies around the globe. That is an extremely bullish situation for gold.

For those who worry that gold maybe in a "bubble" and may be "topping out," you should look at the comments from David Rosenberg, the Chief North American Economist for Merrill Lynch. Speaking about whether gold is topping, he said, "You do not have to be a chartist to know that this is a significant bull market. And as for all the talk of a "gold bubble," it would take a nearly 625% surge in gold to over $6,000 an ounce and a flat stock market to actually get the ratio of the two asset classes back to where it was three decades ago when in fact, bullion was in an unsustainable bubble phase."

If you would like to read the remainder of Rosenberg's quotes that we have included in the free information package, call Goldline and ask for it at 1-877-341-2646. We are also giving away a free copy of the new Goldline Newsletter, which is hot off the press. Call Goldline and ask for the free newsletter along with the CD interview with Frank Barbera. He is a prominent analyst who makes his living off of selling his advice. He has kindly given us this interview so you can get his information and advice for free. Call Goldline now to receive the CD interview and all of the other free articles at 1-877-341-2646.

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