WHEN CURRENCIES FAIL, GOLD MAINTAINS BUYING POWER

Gold and silver are both lower testing support. Gold is trading around $898 an ounce and silver around $11.98. Consolidating around an even number like that is a normal kind of performance. It was to be expected that we would see a consolidation range after pushing as high as we did above resistance. I would look for gold to trade in the $900 to $930 range with the potential to dip back to $875. The likely pattern would be trading around this $900 level a few days before building momentum to move into a test of the $930 range. Gold continues to see strong safe haven demand, fund buying and demand for physical gold is solid. Gold seems to be moving into strong hands. People acquire physical gold when they anticipate holding it for long periods of time. Most of the action today is simply profit-taking as traders are evening up positions. Today is options expiration day, and first notice for deliveries occurs on Friday. There is also some profit-taking present in the markets. On balance, the performance today looks quite solid.

The Federal Reserve will be meeting today and will release its decision tomorrow. The expectation is the Fed will continue on the same course that it has been on for some time. Therefore, I would not anticipate any significant news coming from the Federal Reserve. They are in a position where they have to continue to inflate, maintain low interest rates and buy distressed assets in an effort to support the financial system. With Great Britain on the brink of nationalizing its banks and a good deal of talk about doing the same thing here in the U.S., the Fed must continue to be accommodating. Were they not, the economy would enter another major down-leg and we would see a rash of bank failures, perhaps with some very large banks.

The Case Schiller Home Index came out today and demonstrated that housing prices continue to fall. Moreover, other parts of the world are experiencing severe problems as well. European industrial and construction outlook looks very poor. The steel industry is in severe difficulty, as are many other industries. Great Britain is on the brink of perhaps having its credit rating downgraded, joining Portugal, Greece and Spain; with Ireland not far behind. The Case Schiller Home Index showed the biggest drops in Las Vegas and Phoenix. All twenty metro areas in the country saw home prices drop with eight of them posting their largest monthly decline on record. The one-year drop in home prices were the steepest in Las Vegas with 31.6%, Phoenix 32.9% and San Francisco 30.8%.

Unfortunately, the problems in the housing sector are far from over. Many expect housing values to continue to fall, although perhaps not at such an aggressive rate. In addition, over the first three weeks of January, retail sales were down 2.6% versus December. This again demonstrates that the consumer remains stressed and unable to or unwilling to spend. When people are losing jobs, they don't go out and buy things they don't need. Just yesterday, approximately 76,000 jobs were lost due to lay-offs from the likes of Home Depot, Caterpillar, Microsoft and many others. As long as employment declines, the economy will remain stressed and the Fed will be forced to accommodate. Ultimately, the economy will recover. When it begins to recover, all of the massive stimulus programs will lead to a rapid increase in inflation. Some think the Fed will be able to take that money back out of the system to curtail inflation. To me that seems to be an impossibility. If they tried to do so they would simply plunge the economy back into recession very quickly. There must be some period during which there is an aggressive increase in inflation in order for this economy to begin to have a hope of recovery.

A couple of months ago, the country of Iceland defaulted on its debt. That caused a currency collapse. I warned that the government would likely not survive that kind of situation based upon history. Yesterday the government of Iceland failed and a new government must be formed. History is replete with instances where economic crisis lead to a new government or a new form of government. This is something that we as Americans need to be alert to.

In any and all of these environments, owning gold is an appropriate diversification. Remember, when currencies fail gold maintains purchasing power. When governments fail gold maintains purchasing power. It makes no difference what form of currency people use in a country, gold is always money and always has the tendency to buy roughly the same amount of goods and services over time. This is a major reason why wealthy investors own gold. Based on reports from Merrill Lynch and others, wealthy investors are placing enormous orders for physical gold, which they want to have in their possession for safety. Middle-income investors should be considering the same. The dollar had rallied for a long time. It is now in a declining mode.The dollar is down 36 basis points at 84.37. As the dollar becomes weaker, gold will rise.

Therefore, investors should get started today utilizing this correction as a bargain buying opportunity. Many may wish to utilize Goldline's Price Guarantee Program. This program provides you with a two-week window of opportunity to re-price your order to get more gold for your money in the event of a correction. Ask Goldline about the assets that have this feature available by calling 1-877-341-2646. Goldline also provides a free information package that is outstanding. It includes articles and quotes from Merrill Lynch, Citibank and many others that you will find not only informative, but very helpful in arriving at an understanding of what's going on in the global markets. Goldline also provides you with a company brochure and other helpful data. Call Goldline at 1-877-341-2646 to receive the free information package.

Investors should contact Goldline and ask them to explain the features, benefits and cost structure of the various gold and silver investments that are available. Select those that best meet your own personal and individual investing needs and objectives. Investors looking for low transaction costs may wish to consider bullion assets such as American Eagles, Krugerrands, Canadian Maple Leafs, Silver Bags or Silver Bars. However, the Price Guarantee Program is not available with these assets.

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.

To receive the free information package, including articles on the dollar, the economy and gold, call Goldline at 1-877-341-2646. Goldline also provides several other helpful articles. There are a number of other independent third-party source articles that you will find extremely helpful and informative. You will also receive the Client Account Agreement, a company brochure and a Coin Facts Risk Disclosure booklet. Read these carefully before you make an investment. Call Goldline at 1-877-341-2646 now to receive your free information package.