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Casey Research: Gold’s Short-Term Pain Will Lead to Long-Term Nirvana

By John Morgan   |   Wednesday, 27 Feb 2013 12:05 PM

The top executives at Casey Research, led by chairman and best-selling author Doug Casey, are convinced gold will rise again, although there could be some blood in the water among investors in the meantime.

Casey, author of “Crisis Investing,” one of the top financial bestsellers of all time, recommended not trading on a short-term basis or “you’ll be eaten alive.”

“As for gold, it’s not a bargain at $1,600, but in light of what governments all over the world are doing — creating trillions of new currency units — it’s going higher,” he predicted.

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“I continue to accumulate it mainly for safety, not gain. Right now I’m especially bullish on gold-mining stocks, which offer extraordinary speculative potential.”

Casey Research is a natural resource research firm and periodical publisher in the precious metals, energy and technology space.

David Galland, managing director of the firm, said there are “powerful interests aligned against gold” at the moment, but the culprits are not governments — rather they are institutional investors who are pursuing technical trading strategies.

“Personally, I’m going to hold my fire until and unless gold gets oversold below $1,500 — at which point I suspect the temptation to buy more will become hard to resist,” Galland said.

For Olivier Garret, Casey Research CEO, current technical indicators for gold, silver and mining stocks all look bearish.

“It’s possible that we’ll see market capitulation before this is over,” he said. “Experienced investors in the resource sector know that it is times like these when real money gets made. … With the caveat that we may not have seen the bottom yet, disciplined investors will again make a lot of money when the markets turn around.”

For Bud Conrad, chief economist at the firm, the allure of gold is partly political. The fact the government continues to go full-throttle in printing money and debasing the currency means gold is the best defense against irresponsible leadership in Washington, D.C., he maintained.

“The very public failure of Democrats and Republicans to even discuss solutions, combined with the $75 trillion of unfunded liabilities for baby boomer retirees, guarantees rising debt levels,” Conrad said.

Jeff Clark, senior precious metals analyst at the firm, said the United States is far from alone in pursuing loose fiscal policies that will ultimately unleash inflation — it’s a global government phenomenon. He advised a long-term gold strategy rather than following short-term sentiment, and said that in the meantime, “the blood-in-the-streets process is under way.”

Kevin Brekke, managing editor at Casey Research, agreed longer term investing in gold makes the most sense, especially as the last six months have “sucker-punched the miners” within a longer 18-month period when both metals and miners have grinded lower.

Louis James, chief metals and mining investment strategist at Casey Research, is watching gold price levels and recommends a “hold” strategy for now.

“Our technical-analyst friends tell us that the likely bottom to the current correction should come around $1,545. Some technical analysts are even saying that this gold bull market has topped — I mean absolutely topped, and it’s going to be a long bumpy ride downhill from here,” James said.

But he said it’s also possible gold will reverse course later in 2013, so he is “not selling anything.”

Terry Coxon, senior economist at Casey Research, predicted that for junior gold mining stocks, a positive price horizon is even further down the road. “I wouldn’t expect a recovery until speculators are willing to bet on the metal rising, which I don’t expect to happen this year,” he said of the volatile small gold miners.

Earlier this week, Goldman Sachs cut its 2013 gold price forecast to $1,600 an ounce from $1,810 an ounce, citing gold’s recent price decline coupled with a rise in U.S. real interest rates, Reuters reported.

In early trading Wednesday, gold was priced at $1,604 per ounce.

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