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Precious Metal Investing: Buy Gold Now

Posted May 31, 2008

Eric Roseman on TFN Smart Trading

Many analysts are claiming that the current downturn in the U.S. economy will be short-lived. Eric Roseman looks at the rising foreclosures, plunging housing prices, increasing unemployment and record food and fuel costs… and definitely disagrees. He advises that investors turn to precious metal investing in the time-honored tradition – buy gold. Find out the best way to invest.

Baltimore — (TFN): The following is taken from the transcript of “Buy Gold Now” with Eric Roseman of Commodity Trend Alert on TFN Smart Trading.

Laura Cadden: Many analysts are calling for a quick recovery from the current U.S. recession. That’s if they even acknowledge that we’re indeed in one. The economy has managed to squeak by with a .6% growth rate over the past two years. How does this outlook fit into the picture of increased foreclosure, falling home prices, rising unemployment, and record food and fuel prices? I’ve invited Eric Roseman, Investment Director and Editor of Commodity Trend Alert to get his perspective.

Watch “Buy Gold Now” on TFN Smart Trading.

So Eric, what do you think is happening with the U.S. economy?

Eric Roseman: I think we’re transitioning from a rapidly growing economy in the late 90’s and first part of this decade into a slowing, muddle-through economy that’s gonna take probably several years of very difficult transitioning – getting rid of leveraged debt, the housing boom, which is now a bust. These things historically take a long time to deflate, and the Fed will do everything it can to print more credit, expand the monetary supply, and it’s gonna be a very tough environment.

Laura Cadden: What do you think about U.S. interest rates? Where are they heading?

Eric Roseman: Lower, for the short term. I think interest rates, currently at about two, will go probably about one, maybe half a point… could go as low as zero, depending on how bad the housing crisis gets. But there’s no sight to the end of the housing bust, and foreclosures are still sitting at record highs. There’s a lot of supply, a lot of inventory of existing and new homes. That’s a very ominous sign. So the consumer is struggling with high energy prices, high food, deflation, and unemployment. As that rate rises, and with the housing prices, it’s going to be pretty nasty. Rates are going to come down first, and then eventually, they’ll go back up.

Laura Cadden: What should U.S. investors do?

Eric Roseman: Diversify — definitely. That’s always a good thing to do. I think we should be looking at some raw materials that still offer some excellent diversification, namely the grains. I’d be looking at livestock, which is exceptionally cheap, gold, platinum, which we are now in supply deficits, and you can definitely still look at some foreign currencies, although I’d be very hesitant to sell the dollar here. It took a huge drop the last six-and-a-half years. It’s very, very cheap.

Laura Cadden: What about metals?

Eric Roseman: The metals… silver neutral, palladium neutral to bearish, but very bullish on gold, very bullish on platinum, which are in supply deficit now, and industrials metals, very bearish. We’ve had a huge move in things like copper, lead, tin, and nickel, so I’d avoid them now.

Laura Cadden: There’s been a downward pressure of late on gold prices. What do you think about that?

Eric Roseman: It’s normal. It’s a correction. The dollar and gold historically have an inverse correlation to one another, so when you see the dollar soaring like it did the second half of the 1990’s, gold prices took a bath. Conversely now, a dollar near all-time lows. Gold prices are at all time highs, but it’s more than that. More than the dollar being weak, it’s supply and demand. Over the last almost 18 months, we’ve seen borderline to net supply deficits for gold, and that determines the price for any commodity in supply and demand. More than the dollar, more than interest rates, it is supply and demand, so gold has a long way to run. I think it’ll probably at least double from these levels. Inflation adjusted from its high in 1980. It probably should be around $2,150.00 right now, so I think it’ll go way beyond that before this is over.

Laura Cadden: Do you have a specific recommendation for how people could play that?

Eric Roseman: Yes. I like the metal and I like one of the leading gold producers, so for the latter, if you want to buy a great global gold producer, my favorite is Gold Corp. (GG:NYSE). It has assets in safe countries, namely in Canada, U.S., some foreign countries that don’t nationalize mining properties, great balance sheet, 84% increase in its first quarter earnings, average production costs the lowest in the industry – only at $240 an ounce versus about $8.80, $8.90 an ounce for gold right now. Those are great margins, and they’re getting fatter, and super management with Ian Telfer. So that’s one way to play it.

And to buy the metal, you can do it through Exchange Traded Funds. You can buy the iShares Comex Gold Trust (IAU:AMEX) or SPDR Gold Trust (GLD:NYSE). Very easy to own and very, very liquid — you buy a percentage of gold.

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The Great Dilemma of 2008: Fuel Your SUV or Feed Your Family?

Record high oil prices and booming demand for bio-fuels has caused critical food shortages in the U.S. and will make a record 28 million Americans buy their groceries with food stamps…

Overseas this dilemma has turned deadly, as:

Deadly food riots broke out in Haiti…Stampedes in Chinese supermarkets for the rapeseed oil trampled shoppers… An outright “rice crisis” leaves thousands malnourished throughout the Philippines…

But this is only the beginning. Take action now to protect yourself and your family from what’s quickly becoming the first worldwide food crisis in decades.

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