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Richard Russell on Precious Metals

  1. Question -- What do you think is happening to the precious metals here?

    Answer -- I believe we are in the early stages of a precious metals bull market. The early stages are the toughest stages, because there are great doubt as to "whether this is really a bull market" In the early stages of a bull market optimism can turn to fear overnight.

    The current cycle seems to be as follows -- the stock market declines, and the decline generates doubt about the dollar. The dollar drops along with the stock market, and as the dollar drops, gold rallies. Then the stock market becomes oversold. Stocks rally, investors feel better about the dollar, the dollar rallies and gold declines.

    But all the while the fundamentals are building against the dollar. The current account deficit continues to build, foreigners' doubts about US invincibility increases, and the bear market in US stocks continues.

    Internationally, the battle for exports goes on, and in that battle the US labors under a huge handicap. China, with wages at 5% of US wages, continues to capture the US and the world's manufacturing, and in desperation, nations resort to competitive devaluations. In the end, all paper currency comes under suspicion and the bull market in gold takes off in earnest.

    That's the way I see the future, and it may be a year, two years, five years before the climax comes. But come it will.

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