Record Breaking Event

There’s something big happening around the world with gold.

Last week, the World Gold Council finally released its full report on the global demand for gold in 2011.

Unsurprisingly, gold demand increased again reaching the highest tonnage level in more than a decade. Even with soaring prices, the demand for gold jewellery, gold bars and coins all grew around the world.

Demand for gold investments in 2011 broke 2010’s record by 5% – a clear shift in global mentality that gold is the primary asset in the fight against monetary debasement. China, India and Europe (primarily Germany and Switzerland) all reported record levels of demand in 2011.

But the real story is the increase in gold demand by central banks around the world. Their appetite for gold surged nearly 6 fold (570%) and they once again became net buyers of gold. I predict they will do the same this year (see The Central Bank Secrets.)

The guys running the central banks are not idiots. They know that fiat currencies are losing their value. They know that the more money they print, the less it’s going to be worth. And they know that they will be printing more money – a lot more – in the coming years. They have no choice.

So it’s no wonder why they are using printed money to buy something that no one can print: gold. You can’t dilute gold. You can’t dilute silver. Although you can manipulate the price (as some major banks do), you can only do it for so long before the real supply and demand fundamentals take over. When it does (especially with silver), the short squeeze could be explosive.

It’s funny how those talking heads on TV keep calling a top in the gold market, yet gold continues its 11-year bull run. Have they learned nothing?

Anyone waiting for a clearer sign, such as another round of stimulus, to buy precious metals and related investments are going to be too late. Now that the marginal utility of every dollar is sub 1.00 relative to GDP creation in the US, there is no choice but to keep the printing press going. But the problem is not just here on home turf, but all around the world.

While the world continues to wait for Bernanke to press the “print” button, virtually every other central bank was, and is, unleashing its own monsoon of liquidity right under our noses. As Morgan Stanley puts it, “the Great Monetary Easing Part 2 is in full swing.”

Morgan Stanley Feb 17, 2012:

“In response to a slowing global economy and further downside risks emanating from the possibility of an escalating Eurozone debt crisis, central banks all over the world – and across the DM-EM divide – have been deploying their arsenal for a while now, and should continue to do so. The result is aggressive monetary easing on a global scale – what we have dubbed the Great Monetary Easing, Part 2 (GME2); this follows on from GME1 in 2009-10. The GME2 is now in full swing…

…Last week, the Bank of England announced a further £ 50 billion of gilts purchases, to take place over the next three months. On Tuesday, the Bank of Japan upped the target of its Asset Purchase Program by 50%, from JPY 20 trillion to JPY 30 trillion, with the increment concentrated exclusively on JGB purchases.

… Out of a total of 33 central banks under our coverage, 16 have eased policy in various ways since 4Q11; 7 out of 10 DM central banks and 9 out of 23 EM central banks. Many of these central banks will ease further, on our forecasts, while the central banks of Poland, Korea, Malaysia and Mexico, which have not cut so far, will also join in.”

The world has never printed so much money before. If central banks around the world believe in their own currencies or the value of a dollar, why are they buying gold? For all of the gold and silver critics out there, please answer that question.

Debt levels around the world have never been so high, so it makes perfect sense that Morgan Stanley and other experts believe that an unprecedented additional round of easing will happen in the months ahead. That means central banks will be buying more gold to protect themselves. That means smart investors around the world will do the same. That means gold and silver will climb.

Anyone waiting for the Fed to announce another round of easing to buy gold will be too late. Because everyone is beginning to realise that it is not only the Fed that has a printing press working overtime. It is everyone.

So how can we protect ourselves?

As I said in many past letters, the main protection will come from turning your diluted currency into assets that you can’t dilute – such as gold and silver. But that also means taking advantage of the high risk, high reward investments associated with these precious metals.

Investors will soon realise that the only thing propping up this stock market is the direct infusion of cheap capital and free liquidity. That means the only true sector of growth and value will be in precious metals stocks.

Just last week, I finally released a report on my first investment cover story for 2012, “the World’s Most Important Silver Project” featuring MAG Silver Corp. (TSX: MAG) (NYSE.A: MVG). Already the stock has climbed 13.5% from CDN$8.09 to as high as CDN$9.35, before closing on Friday at CDN$9.18. Clearly the market is beginning to react to this story that has reignited itself from a slumber. And why shouldn’t it? MAG has an incredible asset that is ripe for picking and management has done an incredible job of moving things forward without diluting shareholders. I bought shares of MAG last Monday after the Sunday release of my report. If you haven’t read the report, you can read it here: CLICK HERE

With the markets once again beginning to accept and react to strong precious metals stocks, I will be releasing more reports than usual on stocks I plan on buying this year. I think 2012 is going to be a great year for profit.

Don’t miss it sitting on the sidelines.

Until next week,

Ivan Lo

Equedia Weekly

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Disclosure: We’re biased towards MAG Silver because they are an advertiser and we now own shares. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Reports, including MAG Silver. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will. I am also long gold and silver through ETF’s and bullion, as well as long both major and junior gold and silver companies.
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