Gold's Run-Up Has Further to Go

 | Jan 25, 2012 | 3:18 PM EST
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Maybe you didn't get the memo, so I will give it to you: The Fed is giving you the green light to buy gold. So are the Europeans. So are the Chinese.

In the U.S., Bernanke has decided to ignore the recent strength in the economy to keep rates low, and I don't blame him, because why risk derailing the economy now when inflation is still subdued? Bernanke has to wait for housing to come back and job growth to start. He can't rely on a couple of good months of data.

But you can't wait until things start overheating. You have to jump in now.

Europe? They are printing money right now -- we just don't hear or see the presses. Every statement from Germany, which is in charge, of late has suggested that it will do what it takes to restore growth if the ne'er-do-wells embrace austerity. You aren't going to get good growth without printing money.

There's no inflation over there. There's deflation. But once you start printing and you have low interest rates, as we have in this country and there, you are going to get gold buyers. I don't even know where gold will go if we scrap the euro. Don't even need that.

Which brings us to China. We have data from China that shows record buying by the Chinese into the Chinese New Year. We have rates coming down in China without a real stomping of inflation.

Guess what. That means buy gold.

I think a lot of people have been scaling out or selling out of gold. Just the other day, Dennis Gartman, who people keep saying has a decent record on gold, told you to dump the yellow metal.

Boy, do I ever want to take the other side of that trade. The three biggest economies in the world are all trying to reflate. Interest rates in two of these economies are at record lows, so you aren't making any money with cash. The mining companies I deal with are all hard-pressed to find more gold.

That's a recipe for a true run-up happening right now.

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