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The first-of-the-year slump in gold and silver prices is just a lull before the storm.

January 28, 2011 – The first-of-the-year slump in gold and silver prices is just a lull before the storm. Almost always the lowest prices of the year come in the first couple of months and the smart money knows that is the best time to buy. And this year fears of rising interest rates and government induced delusion about economic recovery are fueling an even larger than usual selloff. But it won’t last.

There is no indication that the government has any intention of backing away from its ill advised monetary policy and there isn’t even a glimmer of light at the end of the economic tunnel. Both of the two main pillars of household wealth – jobs and housing – are still deteriorating and now orders for durable goods have taken an unexpected downturn.

According to an AP release “the Labor Department says the unemployment rate rose in 20 states and fell in 15 . . . and employer payrolls fell in 35 states in December.” The resulting drop in revenues from personal income along with the added burden of unemployment compensation are the last things states need as they struggle to stay afloat.

The housing market is no better off, and according to the New York Times “the long-predicted double-dip in housing has begun, with cities across the country falling to their lowest point in many years.” And it will be at least another year before foreclosures hit their peak.

In spite of that Bernanke peered into his cloudy crystal ball and predicted the GDP will rise this year from 3% to 4%. Putting aside his astonishingly bad forecasting record, assume he is right. Against the predicted 10% deficit the hole will still get 6% to 7% deeper.

Fickle investors will soon wake up to reality and rush back to the market. Smart money will take advantage of current gold and silver prices and beat the stampede.

Shannon King

Senior Staff Writer – GoldSilver.org

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