Jim,

"Many in the gold family have their shorts in a knot concerning an article quoting Professor Roubini that unless we get extreme inflation or extreme deflation those like myself who say gold is going to $1224, $1650 and on to Alf’s numbers are wrong."

"Professor Roubini did not mention gold’s role as a currency nor its relationship to the US dollar."

No he didn’t. It reveals a picture of devaluation.

CIGA Eric

Click charts to enlarge in PDF format

Dear Jim,

Note this quote. Shorts have been successful, but they will not continue to be so.

CIGA Marc.

"Gold shares are currently valued at roughly the same multiple of earnings and assets as they were in 2003 despite the gold price being three times higher. Even at today’s nominal high, the real inflation-adjusted price of gold is 40pc below its all-time high 20 years ago."

Gold gives a precious insight into economy
What a strange and fascinating commodity gold is – a store of value that is no one’s liability, which cannot be printed or debauched by governments but which, with no income stream, has no objective value. A simultaneous hedge against both deflationary slump and inflationary spiral, it is little wonder gold should be the investment of choice for the Armageddon crowd.
By Tom Stevenson
Published: 6:26PM BST 24 Oct 2009

Gold attracts conspiracy theories like no other asset. Google "Yamashita’s Gold" and enter into a half-plausible thriller of Japanese wartime loot and abandoned bullion in the Philippines. It is the stuff of an airport page-turner but what can it tell us about the real world?

Some serious people think that the recent rally in the gold price really is different this time. It’s not like the safe-haven spikes that have pushed the yellow metal through $1,000 an ounce on a handful of recent occasions but each time failed to hold the gain. Traders are pointing to the shallowness of recent pull-backs and the volume of bets buying speculators the right to purchase gold at between $1,100 and $1,200 an ounce.

One long-term market player said this week that he’d been trading gold for 18 years, the first 13 of which no one wanted to talk to him. Today he’s fighting off questions about what’s going on in the market.

What’s happening is that gold is pushing higher in the face of things that history says should push it lower. Gold rises with inflation but it has strengthened in recent months despite easing price pressures and lower inflation expectations. The other tail risk that investors use gold to hedge against – rising defaults and deflation – has also faded into the background.

More…

Dear Jim,

You have said the problems of the West’s financial system are far from over.

This article will interest you.

CIGA Green Hornet.

TARP chief: Banks possibly ‘in more danger now’
Posted by Philip Dru on 10/25/09

WASHINGTON (CNN) – The banking system today may be in a more precarious position than it was a year ago, the man charged with overseeing a $700 billion bailout program said Wednesday.

Neil Barofsky, the special inspector general managing the Troubled Asset Relief Program, told CNN’s Wolf Blitzer on Wednesday that the government’s decision to support bank mergers over the past year may have put the U.S. economy more at risk.

"These banks that were too big to fail are now bigger," Barofsky said. "Government has sponsored and supported several mergers that made them larger and that guarantee, that implicit guarantee of moral hazard, the idea that the government is not going to let these banks fail, which was implicit a year ago, is now explicit, we’ve said it. So if anything, not only have there not been any meaningful regulatory reform to make it less likely, in a lot of ways, the government has made such problems more likely.

"Potentially we could be in more danger now than we were a year ago," he added.

Earlier in the day, Barofsky issued a scathing report criticizing the Treasury Department for not being transparent enough about how bailout money was being spent. He warned that this could have lasting effects.

More…