Note: For readers not familiar with the concept of our “Melmania” section,
this is where your editor can take any subject and develop arguments regarding
some ultimate conclusions. Since some of those conclusions might sound
extremely radical, the name of “Melmania” seems appropriate.
I just returned from Vancouver where I participated in the “2007 Resource
Investor Conference” sponsored and organized by Cambridge House International
Inc. Many of the top investment experts were present and most particularly it
was an opportunity to gauge the prevailing outlook for precious and base metals
In summary, the mood was relentlessly bullish over the long term, but there were
stark differences in the outlook for the next three to six months. Some believed
we would still see further corrections, particularly in the base metals (except
nickel) and there were also predictions we could see $500 gold before it headed
higher later in the year.
My own workshop emphasized the fact that there was already a disconnect between
the major securities markets and the precious metals markets (as outlined in
Melmania, January 19) and I expect the precious metals to move strongly higher
over time. That also echoed the prevailing opinion at the conference.
Ultimately, there was virtual unanimity behind perhaps the most important single
factor of all, as related to our world of metals investing, which is that the
U.S. Dollar is expected to move substantially lower in the intermediate to long
Among the reasons offered in support for this belief were:
The enormous Balance of Trade Deficit now ongoing
The substantial American budgetary deficits
Total foreign exchange (Forex) assets held outside the USA continue to grow at
an astonishing rate
A rising potential for an international ‘accident’, which could be military,
economic or social, which would likely precipitate a run on the U.S. Dollar and
which could slice the value of the Greenback thereby leading to an immediate
acceleration of inflation.
The growing weakness and vulnerability of Americans to threats in two
directions, namely the required importation of over ten million barrels of
petroleum each day, much of it from nations hostile to themselves, and the equal
vulnerability to financial accidents which would dramatically reduce the value
of their currency.
Another view put forward by analyst Ian Gordon was that the US economy runs in
long term cycles, called Kondratieff Cycles, of approximately sixty years. Each
cycle consists of four seasons, spring and summer when economic activity gains,
autumn when it peaks at a high level, and then‘winter’ when he predicts the
economy is in danger of severe contraction which will serve to reduce the mass
of outstanding public and private debt through the mechanisms of failing
businesses, impoverished individuals and massive numbers of bankruptcies. In
such an atmosphere, Mr. Gordon suggests the U.S. Dollar is vulnerable to runs by
foreigners pulling investments out of America and he also believes the
background of a failing economy and weakening dollar would convince many to
invest in gold, driving the price of the yellow metal higher.
Conferences of this nature, which are open to the entire investing public, are
eminently worth your while to attend. It is difficult to imagine a setting where
the non-professional can hear such a wide spectrum of investor information and
can meet and talk with so many industry leaders. Investment conferences
conducted in English occur in cities like Vancouver, Toronto, Calgary, New
Orleans, Las Vegas, San Francisco, New Orleans, New York and London as well as
other places including Australia and South Africa.
(As soon as our site is in complete operation, a calendar of conferences will be
made available and will be updated on a regular basis.)
It is interesting to note that on the first trading day following the gathering,
gold rose by a sharp $12 to just above $645, the highest quote in several weeks.
Perhaps we may not have to wait as long as some expect for a resumption of last
spring’s powerful yellow bull.