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i-Phones and Gold Investing make one helluva "pairs trade" right now…

THIS CHART shows the tale of two "crisis-beating" assets – Gold and Apple Inc., writes Brian Hunt in Steve Sjuggerud’s Daily Wealth.

In the past three years, just about every asset you can think of has either lost money or treaded water. The 2008 credit-crisis selloff was so severe, even recent rallies haven’t been able to carry assets back to their levels of a few years ago. Two exceptions here are Gold Bullion and shares of Apple.

This is what’s called a "performance chart." Performance charts graph the percentage returns of assets against each other. In this case, it’s the past three years of gold (gold line) and Apple shares (blue line).

Amazingly, both assets have registered the same gains since mid-2007…around 80%. Gold is enjoying price strength because of its role as "real money" crisis insurance. Apple is enjoying brand dominance in phones and music players. It’s a heck of a "pairs trade".

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Source:Gold & Apple Both Beating the Bear

Junior Gold Miners Fund outperforms other funds Thursday.

Source:Gold Miners ETF Rallies

New Orleans’ host Brien Lundin’s short-term take on silver and Gold Prices…

The GOLD RALLY that began last fall and drove Gold Prices through $1200 in late November doesn’t seem to be panning out the way the rallies of 2005 and 2007 did, says the Gold Report.

In this Gold Report interview, Gold Newsletter editor and publisher Brien Lundin admits he’s a bit worried about this run’s breakout, but expects gold to remain strong – and Gold Mining stocks, particularly juniors.

With a career spanning three decades in the investment markets, and annual host of the New Orleans Investment Conference, Brien is stoked on silver too, as he explains here…

The Gold Report: It’s been a fun quick ride up to $1200 gold and another little correction. Where do you see us going from here?

Brien Lundin: Quite honestly, I’m still trying to figure out that myself. I rarely make specific price predictions, but let myself be goaded into it by the power of the rally that began last fall, when we burst through $1000 and just kept going up. It was a very close analog to the two previous breakouts that the metal had exhibited in 2005 and 2007, each of which followed nearly a year-long price consolidation. I believe those rallies took the price up 75% and 56%, respectively.

Based on those performances, I projected that the rally that began in the fall would take gold up to between $1350 to $1500 by sometime this spring. We traced those three rallies, the first two plus this one, in an analog chart that we published a couple of times in Gold Newsletter. It’s in the current issue, in fact.

That chart shows the correction that gold underwent this January-February kind of broke the trend that the two prior rallies exhibited. So this is a crucial time.

It’s not that hope is lost, because the recent recovery in Gold Prices has me heartened a bit. But this rally is in danger of failing unless the metal really continues upward now and in the near future. I think we really need to clear $1250 over the next six to eight weeks to validate the continuance of this as another one of these major gold rallies. If that happens, I’ll put that $1350-to-$1500 target back in place for this run.

TGR: Ian Gordon, who founded the Longwave Group, is looking at the Dow getting down to 5250 this year, having a correction and then starting to move down toward 1000. He sees gold as the ultimate safe haven and, of course, moving the opposite direction. What’s the possibility that could be the catalyst to gold’s move up to $1250?

Brien Lundin: I can see just about anything working in gold’s favor right now. Very roughly, very generally, if you look at the two possible scenarios facing the US and the world economies right now, you essentially have two options. One would be recovery; the second would be relapse. Under either scenario, although there would be some extreme – and I stress the word "extreme" – volatility involved, gold would end up the winner in either case.

If we had an economic recovery, the Federal Reserve in the US, for example, would be reticent to raise rates to strangle that nascent recovery. So we’d still have a very easy-money environment, despite what the Fed may say now. That recovery would prompt bank lending again and there’s about a trillion dollars of excess bank reserves just hovering over the US economy, like an ocean in a water balloon. Just the start of bank lending would turn those excess bank reserves into new currency, into liquidity overflowing the economy. That would be highly inflationary and bullish for gold. In addition, any type of economic recovery would be bullish for commodities in general and gold would benefit from that, as well.

The other scenario, where you would have an economic relapse, a double-dip recession, or worse, would prompt more government spending, more government debt, more government currency creation. Gold would ultimately benefit from that scenario as well.

So either path would end up, over the long term, being bullish for gold. However, again, that would be a very bumpy road, especially if we went into an economic relapse, because there would be liquidity crunches. As you know, those have not been very good for gold or gold investors in recent history.

TGR: So it’s that liquidity need again.

Brien Lundin: Yes, absolutely. If you remember back in September of ‘08 we were really just a hair’s-breadth away from global bank runs. People were rushing for the safety of gold bullion and cash and were shying away – running away, in fact – from equities or any other type of paper investment.

TGR: And, of course, the next black swan could arise from what’s going on in the European Union with Greece and Ireland and Spain, some of these other countries.

Brien Lundin: Absolutely. You won’t see this angle really reported much in the mainstream media, but it reflects on fiat currencies in general. In the current environment, where many if not most of the world’s currencies are being looked at askew, the dollar is the healthiest one standing and it’s not looking so good itself. It’s only a matter of time before the world’s investors and savers, to an even greater extent, look at the dollar and say it’s no great shakes either. What’s left? Gold.

TGR: Right.

Brien Lundin: That’s already happening to a growing extent, especially outside the borders of the US And it’s not just in Asia, but also in Europe.

TGR: So you obviously believe that investors should Buy Gold, but I’m assuming also you believe there are some opportunities in Gold Mining stocks.

Brien Lundin: I do, and partly that’s because I don’t really forecast the type of equities crash that Ian anticipates, although we think very much alike in the terms of the value of gold and the future of gold-oriented stocks. In particular, I focus a lot on the special situation stocks, the juniors that are actually exploring and finding gold, or are on the verge of major discoveries.

TGR: Going back to what you said earlier about see gold up to $1250 in the next six to eight weeks, if that’s the case could silver could have a run to, say, $20?

Brien Lundin: Oh, absolutely, to $19 at least. The gold-silver ratio has gotten out of whack once again and silver’s just due for a bounce. I may have seemed a bit pessimistic on gold. I am worried about it, but over the last couple of weeks it seems to me that gold has exhibited a real desire to take off. All that’s really kept it back have been headlines here and there about tightening in China, etc. That’s exacerbating the volatility in speculative, derivative gold – speculators going in and out of the Gold Futures markets. Overseas and worldwide outside the US, we’ve seen very strong physical demand and some of the commercials have begun rolling back their short positions. So from a technical standpoint, gold looks fairly positive in the short term.

TGR: But you’re even more positive on silver.

Brien Lundin: Oh, yes.

TGR: All right. Finally, Brien, what’s your take on the rare elements story? Is it a bubble or is it just the beginning?

Brien Lundin: I think it’s very similar to the uranium story of a few years ago, where the logic is inescapable, but the timing is indeterminate. It obviously got ahead of itself last year, and I think our good friend, Jim Dines, had a good bit to do with that. It was kind of a self-fulfilling prophecy, but as usual, he was very smart in pinpointing an area that deserved attention. So I think it’s going to be here for a while, but be cautious and play it correctly.

TGR: As usual, you’ve been very enlightening and full of lots of ideas for our readers to digest. We appreciate it.

Brien Lundin: It’s always a pleasure.

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Source:Good for Gold, Better for Silver

Jan. 20 (Bloomberg) — Gold fell the most in a month as a stronger dollar reduced demand for the precious metal as a store of value. Platinum dropped from a 17-month high.

Source:Gold Falls Most in a Month as Dollar Rallies; Platinum Declines (Bloomberg)

Buying Gold and selling stocks was a phenomenal trade this decade. Now what…?

YOU MAY RECALL our Trade of the Decade, writes Bill Bonner in his Daily Reckoning, which marked its 10th anniversary in August 2009…

Buy Gold on dips…sell stocks on rallies. Well, we’ve been very happy with it. But the decade is coming to an end. It’s time to thinking about the NEXT decade.

You may also recall that as gold went up, we became more and more concerned.

When Lehman went down, it seemed obvious that the feds were going to do the wrong thing. We were right. They did. They put up trillions of dollars to ‘rescue’ the economy. Since we knew the ‘rescue’ wouldn’t work, we guessed that they would continue pumping in money they didn’t have in order to keep trying to do what couldn’t be done. Under cover of an ‘emergency’ they were able to siphon off billions of dollars for their friends on Wall Street and for their pet boondoggles. And the voters couldn’t complain…at least they were ‘doing something’ to fix the economy!

This led to a very simple observation – eventually inflation (and Gold Prices) would go up even more. Because the quantity of money would increase faster than the goods and services that it could buy.

What bothered us here at The Daily Reckoning was that this analysis was too easy and too obvious. What’s more, it was an analysis that was widely shared. We don’t like it when our points of view become fashionable. And we don’t like it when the "story" is too easy to tell and too easy to understand. When you have a storyline that everyone picks up, it almost always turns out to be wrong.

Then, the smart money began Buying Gold. John Paulsen made a fortune in the ‘07-’08 period by correctly understanding the bubble in the financial sector and betting against it. A few months ago, he announced his next big bet: gold.

He explained that gold was a "can’t lose" investment. If the economy recovered, inflation would come back and push gold up. If the economy didn’t recover, the feds would continue pushing money and credit into the system, making the eventual inflation worse than ever.

John Williams of ShadowStats came to a similar conclusion. He noted that the recovery wasn’t working…and that the feds had no choice but to continue piling up inflationary tinder. When the spark finally reaches it, he says, the result won’t be inflation, but hyperinflation of the blazing sort.

We don’t disagree. The logic seems right to us. That is what OUGHT to happen. But what bothers us is that Mr. Market is a contrary ol’ coot. He always does what he ought to do. But he rarely does it when and how you expect.

What is he up to now? Darned if we know. The dollar is going up. Is it just a bounce? Or is it a trend?

What would be the most surprising and most mischievous thing Mr. Market could do? Make the Dollar more expensive!

• A strong Dollar would undermine hopes for an export-led recovery in the US (American made goods would be less competitive…)
• It would whack the carry-trade speculators hard. They borrowed cheap dollars. Now they’ll have to pay back expensive ones.
• It would encourage people to save dollars rather than spend them – thus undermining a consumer-led recovery too.
• A rising Dollar would also drop the Gold Price – temporarily – shaking off the fair-weather gold buyers in advance of the next phase of the bull market.

So, ask yourself. If you were as ornery as Mr. Market…what would you do?

On the other side of our trade – "Sell stocks" – it’s been "A nightmare decade for stocks," says a headline in the Wall Street Journal.

"Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade."

The 1990s was the best calendar decade in history for stocks, with an annual gain on average of 17.5%. This decade, by contrast, was the worst calendar decade for stocks going all the way back to the 1820s.

Which gives us a sense of triumph…you know, the very thing that comes before a fall. Ten years ago, we warned readers that the US stock market was going into a bear market that would be like the Japanese market following the stock crash in Tokyo in ‘89. It would be "long, soft and slow" we said.

Then, the market rebounded. Investors thought the promises of the ’90s – "stocks for the long run" or even "Dow 36,000" – were still good. As for The Daily Reckoning, it was obvious that we didn’t know what we were talking about, because the Dow just kept going up…first above the high set in 1999…and then all the way to over 14,000.

Even we had to admit: If this was a bear market, it was a very strange one!

Ten years later, the decade of the ’00s has proven to be the worst ever. Yes, dear reader, the ’00s were the worst for investors ever, even worse than the 1930s.

Now, we are wondering what’s next for the stock market? More of the same is our guess. The bear market that began in January ‘00 still has not fully expressed itself. Stocks have not been beaten down to bargain levels – where they sell at 5 to 8 times earnings. Investors have not given up. There is no widespread sense of disgust and disillusionment with the stock market.

And it still takes about 10 ounces of gold to buy the Dow stocks. At the bottom, you’ll be able to buy the Dow for just 1 or 2 ounces. And then…you’ll think twice. Because everyone around you will be telling you that stocks are ‘finished’.

And who knows? Maybe they’ll be right…

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Source:Buy Gold, Sell Stocks Again?