Gold will be the currency of last resort ....
Leading the way in the rebound is physical demand for gold, as geopolitical worries continue to put investors on edge.
The never ending Israeli/Arab conflict, the nuclear standoff with Iran, and the bombings in India have once again supplied a reason(s) to own gold. The world is becoming increasing more unstable and more investors are turning to gold for some protection.
Later this fall, I expect to see a surge in buying that will surprise many as major hedge funds, central banks, and other wealthy investors seek alternatives to the U.S. dollar.
Gold will be the currency of last resort as the world comes to grip with and realizes the problematic consequences of fiat money. It won't matter whether you have dollars, euros, or any other fiat currency, because gold will outperform them all.
Many have been shuffling their paper currencies -- moving from the dollar to the euro or vise versa for example -- in order to protect their wealth. These investors will finally tire of the shuffle and ultimately come to the correct conclusion that no fiat currency can protect their wealth.
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I expect this trend to really get going soon and remain intact for a very long time.
I have heard rumors this past week from a very reliable source that some very large buyers are looking to fill orders for physical gold in excess of US$200 million.
While it is just a rumor, this kind of activity would make sense with what I see beginning to unfold in the financial world. Large amounts of physical buying will put great upward pressure on the spot prices for gold, silver, platinum and palladium.
While this is happening I expect the mining stocks to once again pick up the momentum from where they last left off in late April.
For the most part, the mining stocks have been on a major vacation this summer -- giving the term "Summer Doldrums" new meaning.
Trading volumes have been pathetic, but activity this past week has been encouraging that we are hopefully ready to turn the corner on this chapter and move back into profit mode.
For now, the smart investors are watching the best junior mining companies with the most assets whose stock prices are hitting ridiculously low levels.
Making some good buys during this timeframe should prove very wise in the next 6 months as these stocks rebound quite nicely as the market turns the corner.