Dear Reader,

Last week, The Beard announced that the Fed may think about considering possibly easing back a tiny bit on the cash infusion life support it's been administering to the economy – just as David Galland predicted in our Daily Dispatch ten days ago – precipitating a global selloff.

Some analysts seemed to see the over $60 drop in our favorite metal as confirmation of their predictions that gold was slated to go lower. It seems a bit myopic to me to attach a great deal of meaning to gold's retreat when everything was in full-flight panic mode. This wasn't about gold, but about the global economy itself.

It's really quite striking that investors of almost every stripe around the world reacted so violently to the Fed's timid suggestion that it might be time to start thinking of easing back on the money printing. The message was loud and clear: an economic “recovery” that can't stand even the suggestion of reduced subsidy is not a recovery at all.

It's as though the world's heart had stopped, and while everyone thought government was administering shock paddles to get it going again, it actually put the patient on total bypass. The world's economic heart was neither fixed nor replaced, but set aside as government switched over to pumping cash blood directly through the arteries of the economy. And now they can't stop.

The violent reaction to the mere suggestion of tapering that artificial blood flow is an unmistakable and undeniable admission that the emperor has no clothes.

But of course, in the real world, if a plucky little boy did declare that the emperor had no clothes, few people would see the truth that had been before them all along. Instead, the boy would be tackled by a number of large, gun-toting thugs and dragged off, never to be seen again. Everyone within earshot would suddenly find themselves subject to government “help” from guys with white suits, rubber trucks, and no sense of humor. The parade would go on, or try to go on, just as it is in our world today.

Meanwhile, the junior resource sector has been so beaten up, people are starting to compare the current market to the “nuclear winter” of the late 1990s. But as Andrey Dashkov shows below, we are still far from the complete market capitulation of those days. And that means that buyers must still beware, sticking to the best of the best – with plenty of cash in the bank to weather the storm.

Sincerely,

Louis James
Senior Metals Investment Strategist
Casey Research

Rock & Stock Stats
Last
One Month Ago
One Year Ago
Gold 1,298.60 1,377.60 1,565.50
Silver 20.12 22.46 26.84
Copper 3.09 3.34 3.30
Oil 95.01 96.18 78.20
Gold Producers (GDX) 24.90 27.32 44.82
Gold Junior Stocks (GDXJ) 9.50 10.84 19.33
Silver Stocks (SIL) 11.73 13.29 18.68
TSX (Toronto Stock Exchange) 11,995.66 12,742.43 11, 408.32
TSX Venture 895.74 939.41 1,217.35