Mining for Gold on Wall Street–The Daily Reckoning

11/02/11 Baltimore, Maryland – Many technical analysts are saying the gold and silver markets are “breaking down.” I say the precious metals markets are cracking up…with laughter at the monetary shenanigans going on in the US, Europe and elsewhere.

Sure, gold and silver have suffered a sharp correction over the last few weeks. But so what; corrections always occur during long-term bull markets. Gold and silver are still cheap, which means that long-term investors cannot afford to ignore the recent weakness in the precious metals markets.

The gold price, at $1,664 an ounce, is still well below the inflation-adjusted all-time high of $2,330. Likewise, the silver price, at $32 an ounce, could quadruple and still not reach its inflation-adjusted all-time high of $136.

These comparisons do not automatically mean gold and silver are a “buy,” but they do illustrate how much higher prices could climb over the near term simply to “catch up” with inflation.

Now add in the fact that the powers in charge of the dollar and the euro are losing control of the currencies they purport to control, and voilà, you’ve got all the ingredients necessary for a continuing bull market in gold and silver.

If, as I expect, gold and silver prices will resume their decade-long bull market very soon, gold and silver stocks may provide even larger returns than the metals themselves. A balanced long-term investment allocation, therefore, should include both bullion and stocks.

Admittedly, gold stocks have been a big disappointment during the latest phase of the gold bull market. For more than…

via Economic News and Ideas on Debt, the Market, Gold, Oil, and Investing..

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