Back up the Truck on Gold and Silver, says James Turk

The slow summer months for the precious metals market will be anything but slow this year, according to precious metals expert, James Turk.

In an interview with Eric King of King World News, the founder of bullion storage firm, Goldmoney.com, said he expects gold and silver to rally strongly this summer, bucking the 30-year established seasonal trend of softness in metals prices during the summer months of July and August—the time of year when gold and silver typically put in lows for the year.

However, Turk believes the lows were already made in May during the cascading sell off in silver from its perch of nearly $50, taking the white metal to the $32 level and the yellow metal to $1,480 in a sell off—triggered by some profit taking and multiple, rapid succession, and controversial futures margin hikes instituted by the Chicago Mercantile Exchange.

“What we are seeing right now is a double-bottom in silver with gold staying strong near $1,500,” Turk said to KWN.  “With options expiration on both exchanges now behind us, we can expect a bounce from here.”

Turk cites growing tensions among populations around the world as politicians increasingly shift the burden of bad loans made by banks onto the public books.  Greece’s spectral will prove to be only the beginning of civil unrest in Europe this summer, Turk predicts.

“We’ve got civil disobedience growing in different countries,” said Turk.  “People are becoming fed up by bad decisions made by politicians that favor bankers rather than taxpayers.”

“People just have not come to grips with the fact that governments are running out of money,” Turk added, “which brings to mind my favorite Margaret Thatcher quote, ‘The problem with socialism is that eventually you run out of other people’s money.’  There is also a great deal of non-union tension as rising costs are continuing to erode people’s living standards.”

In sharp contrast to predictions made this week by Swiss money manager Marc Faber, who said on CNBC TV12 on June 29 that all asset prices will sink from a lack of Fed “stimulus” from its QE programs this summer and early Fall, Turk sees a rerun of the summer of 1982, instead.

It was then that the government of Mexico failed to make interest payments on its dollar-denominated sovereign notes during Paul Volker’s (the, then, chairman of the Federal Reserve) punishing interest rate increases of both the federal funds rate and discount rate.  Through several currency devaluations, which ensued through to the end of the year of 1982, the Mexican government  kicked off a run on the peso to the safe haven of gold.  Gold soared to more than $520 by the first quarter of 1983, from approximately $290—the low set at the start of the crisis in July of 1982.

Turk expects another run to gold, but this time the people of Europe’s peripheral PIIGS (Portugal, Ireland, Italy, Greece and Spain) will trigger another golden summer of 1982.

“In fact, with bankruptcies of governments becoming more and more likely, the reasons for owning gold and silver have become even more pronounced,” Turk continued.  “Summer has only just started, but I still see this as a summer that will be like 1982, one for the history books.”

Additionally, Turk points out that the gold/silver price ratio has widen significantly since the 31:1 print reached on April 28.  The ratio has since moved back sharply to levels not seen since the 45:1 ratio was taken out to the downside in February during the silver price breakout above the closing high of $30.84 set on Dec. 31, 2010.

“I actually like the action of the gold/silver ratio; yesterday it closed at 44.5 so it is back at support,” said Turk.  “This is a further indication to me that the correction has reached its nadir.  The interesting thing about corrections like this Eric is how rapidly bullish sentiment evaporates even while the fundamental factors driving the metals higher this past ten years remains very favorable.”

Marc Faber gets Gloomier Still

Marc Faber, publisher and editor of the Gloom Boom Doom report, told CNBC he expects a bigger correction than he earlier predicted.

Instead of a 10% correction he once saw for the S&P, he now expects the 500-stock index could drop to 1,150, sometime from August through October, or drop more than 16% from the May 2 high of 1,370.58.

“Usually what happens in the market, we have seasonal strength in January, then weakness in February, then strength in March-April and then weakness in May-June and then again a summer rally in July until early August,” Faber told Udayan Mukherjee of CNBC TV-18.

“So, we are moving into seasonally strong period,” he continued.  “But unlike many strategists, I don’t think we are going to make a new high. I think the S&P or the overall market in the U.S. will close 2011 at about this level or lower not higher as every strategist is predicting. I think we have seen the highs for this year, let us put it this way.”

Faber, who initially said on Oct. 26 he expected a 10% correction in the S&P, reiterated his call on Jan. 25, and once again reminded investors in an interview with Newsmax in early May, now sees a deeper correction of another nearly 100 points from his original prediction.

“I think we can rally to around 1,330 on the S&P now, but not make a new high above the 1,370 highs, which we saw in May,” he said.  “And then, in my view, we would be going down to maybe 1,150 on the S&P.”

As far as timing of the low, the seasonal weak period of late August through October will most likely be when the S&P bottoms at support at 1,150, according to Faber.  Historical data reveals very low volumes of incoming funds moving into stocks during the early fall months of September and October.

“I think the second half of August, September-October will be rough months,” Faber warned.

His overall thesis for stocks can be applied to commodities, as well.  Faber suggested that slowing economies in the U.S., Europe and China will bite into assets prices which have benefited from the risk-on tide of investment capital from money and hedge funds.  That tide is turning, according to Faber.

Risk-off trading is back.  He anticipates that oil, too, will drop another 20% from the already nearly 20% drop in Brent from its $127.02 print on April 11.

“I think all commodities are weakening at the present time, which essentially reflect a significant slow down in the global economy,” he said.  “We will weaken further, in my opinion, until about the end of December. I do not think that oil will collapse. I think we may go down to around $80-$85 per barrel [Brent] or so and then have further strengthening in the years ahead.”

Jim Rogers: What now for Commodities?

Jim Rogers said the commodities bull market is still on track to higher prices, but he isn’t buying anything right now.

In an exclusive interview with IndexUniverse.com, the commodities king said the downdraft in commodities the markets experienced in June isn’t unusual. “It’s the way the world works.”

“If you look at oil, for instance, it has gone down over 50% three or four different times since 1998,” added Rogers.  “That’s what markets do, and they will continue to do that.”

When asked whether the commodities bull market that he envisioned more than a decade ago and about which he wrote in his book, “Hot Commodities,” is still intact, Rogers said, “yes.”

Close followers of Rogers know he likes agriculture more than any commodity, longer term.  Populations are growing in size and prosperity in Asia, bringing with that growth an upgraded and voluminous diet—the demand side of the price equation.  On the supply side, Rogers notes the aging of farming personnel will pose challenges to the restocking of qualified talent.

“We know that there are huge shortages of agriculture developing,” he said.  “I don’t know if you knew this, but the average age of farmers in America is 58 years old. In 10 years, they’re going to be 68, if they’re still alive. Throughout the world, we have serious, maybe even catastrophic developments in agriculture, which is going to hurt us all over the next couple of decades.”

In the oil market, Rogers sites the lack of meaningful new discoveries to offset Asia’s insatiable demand for crude, reminiscent of the days post WWII in the United States as industrial growth jumped into overdrive to supply a war-torn world with everything from household appliances and automobiles to military and commercial planes.  China isn’t selling air force fighter planes yet, but it sells just about everything else that can fit into a big box store.  Nevertheless, China has overtaken the U.S. in oil imports.

“I do not see any major new sources of supply [of oil]. We know that the known reserves of oil continue to decline worldwide,” Rogers explained.

And as far as the hottest commodity since the summer of 2010, silver, Rogers likes it for the rest of the decade and wants more of the poor-man’s precious metal on pullbacks.  He had said early in May that the moonshot move to $50 in April didn’t look healthy and hoped for a pullback to kill the froth.

“Well, I’m long silver, and if it goes down more, I hope I’m smart enough to buy more,” he said.  “I didn’t particularly like seeing it spike, because anything that turns into a parabolic move has to be sold. And I don’t want to sell my silver. I want to own it 10 years from now. Fortunately, that spike did break, and I find that encouraging and bullish.”

Silver’s a Good Buy in the Low 30s, says Peter Schiff

Schiff puts his money where his mouth is

As silver consolidates from its near-triple bull run to almost $50 on May 2 from last year’s July low of approximately $17.50, Peter Schiff said he believes silver represents a good buy in the low 30s.

Speaking to Eric King of King World News, the Europacific Capital president and author of several financial books told KWN that U.S. sovereign debt is the “grandaddy of all sovereign credit problems, credit problems and our crisis is going to be too big to hide beneath a bailout or to kick down the road.”

As an Anglo-American institution established in 1945 to oversee the global financial system, the International Monetary Fund (IMF) has been an integral part of negotiations and sources of funding for many member nations under financial duress.  As a means for smaller nations to access debt financing, the IMF has been involved in the vast majority of emergency loans throughout the world.

But when large member states become insolvent, analysts wonder what will happen then.

Greece’s GDP of $330 billion is akin to the total production of the U.S. state of Maryland.  Other EU members under financial stress, Portugal and Ireland, weigh in at approximately slender $230 billion a piece.  Those are relatively small potatoes when compared with Spain’s $1.5 billion and Italy’s $2.1 billion, respectively.  Many analysts have little doubt that if traders take Italian or Spain 10-year bonds to rates of more than 10%, the end of the euro in its present form is near.

But Schiff is looking far ahead.  He believes the euro is already on the slippery slope to a breakup, and has set his sights further down the road to the U.S. dollar and the zero chance of a bailout from a dollar crisis.

“The IMF is not going to step in with loans to the United States government,” said Schiff.  “The IMF is getting its money from the U.S., and of course we are getting our money from China.  So when we fail, there is no way out.”

To put the U.S. fiscal deficit in prospective: presently, the yearly U.S. budget shortfall per year is more than the entire GDP of Spain.  So when the music stops in the U.S. Treasury market, the yearly fiscal deficits could skyrocket more than the unprecedented $1.6 trillion deficit slated for fiscal 2012, which would then create a Greek-style negative feedback loop to “fiat currency graveyard,” as James Turk of Goldmoney likes to put it.

“We’re [U.S.] going to have the same problems as Greece,” added Schiff.  “The reason that Greece can’t pay its bills is that interest rates are rising and the Greeks don’t have the money.  Well, the same thing is going to happen in America.  When interest rates eventually rise, we can’t afford to pay because we’ve borrowed so much … and unless we can find new buyers of our debt, we’re going to have to default.”

What would happen to the price of silver and gold under that scenario?  Schiff, a big proponent of the precious metals since the early 2000s, said prices will move “straight up,” stressing to investors that the time to buy the metals is “before that atmosphere” comes upon us, not during the crisis.

His advice for silver aficionados is to stay the course through the volatile price swings in the metal and buy at discounts from recent highs, which today calculates to approximately a 33 percent discount.  In the Monday morning trade in New York, silver trades at $34.01.

“I think anything in the low $30s represents a pretty good entry point for people to buy … Once we go through $50 … I see silver going to $200 an ounce,” concluded Schiff.  “I own a lot of silver personally because of that outlook.”

QE3 “Coming back on in Spades,” says Jim Sinclair

Bullion expert Jim Sinclair has no doubt that Bernanke and Fed will come in with QE3.  Languishing stocks, downgrading GDP projections, and record wide credit spreads in Europe evolved from investor expectations that the ECB and the Fed are done printing money, said Sinclair.

The former adviser to the billionaire Hunt brothers of Texas said the Fed has no choice but to embark on QE3, or whatever it will be called when an announcement is finally made.  In the meantime, investors taking the Fed at its word could find themselves in a whipsaw trade.

“You’ve got to continue what you’ve been doing,” warned Sinclair.  “The slightest indication that you wouldn’t continue has brought this crisis on.  But you see QE is the kind of thing that puts some sort of balm on the sore of fear.  Whether they call it QE or not, it’s coming back on in spades.”

As the Fed’s so-called QE2 comes to an end on June 30, investors have voted no confidence in Bernanke’s plan to end the easy money policies instituted in April 2009.  After peaking at a high of 12,876 on May 2, the Dow shed nearly 1,000 points in anticipation of a shut down of cash flowing through its 18-primary dealer network.

Beyond the monetary realities confronting the Fed, Sinclair is betting that the presidential election cycle adds to his conviction of a Fed reflation announcement this summer.  The bond king, Bill Gross of PIMCO, agrees, and suggested on his Twitter account that Bernanke is likely to plant a hint of a QE3 plan in August during the Fed’s annual symposium in Jackson Hole, Wyoming.

“Next Jackson Hole in August will likely hint at QE3/interest rate caps,” Gross tweeted.

The timing of an announcement (or hint) in August would line up nicely to a September kickoff to the 2012 presidential race.  And after a CNN poll released Jun. 8, indicating that the electorate is losing confidence in the Obama recovery, a nervous White House will sure be pressuring the Fed to do something to keep the house of cards up a little longer.

From CNN:

“CNN Poll: Obama approval rating drops as fears of depression rise”

“President Barack Obama’s overall approval rating has dropped below 50% as a growing number of Americans worry that the U.S. is likely to slip into another Great Depression within the next 12 months,” according to CNN.

Confidence in the nation’s leaders to solve the financial crisis is paramount to the Fed’s goal of debasing the U.S. dollar in an orderly manner.  Without the confidence that the Fed will continue supporting asset prices (stocks), the economy and the dollar move into what George Soros calls the “Act II” of the global financial crisis.  No official (either governmental or quasi-governmental) wants to end up at the helm when the system collapses.

“If people lose confidence, it isn’t the country that suffers, it’s the currency of the country that suffers,” Sinclair explains.  “This whole thing is put together with mirrors, smoke and spit.  You can’t afford to have any kind of financial crisis or all of the old wounds will open up and hemorrhage because of the investment that’s already been made, you’re stuck in a bad investment, the dollar.  All currencies are going into oblivion and that’s why they (investors) are buying gold.”

With the crisis in Europe and the looming problems in the United States coming to a head all over again, Sinclair told Eric King of King World News earlier in the week, “You’re out of your mind if you sell gold assets now.”

Marc Faber’s Latest S&P Outlook; 3 China Stocks under Fire

Featured on Bloomberg this morning, Marc Faber said he doesn’t see a resumption of the risk-on trade until Bernanke and the Fed resume quantitative easing once again after the Fed’s program to recapitalize the banks ends June 30.

Assets benefiting from the Fed’s extraordinary measures to prime the pump of the U.S. economy won’t get the gusty tailwind that assets such as stocks, commodities and precious metals have been enjoying since the March 2009 low of 666 for the S&P.

“I think we’ve seen the high for the year,” Faber said of the S&P.

“I think the Fed, they could print money, QE3, QE4 and so forth,” added Faber.  “But they’re going to wait, because Mr. Bernanke, very clearly understands.  A year ago, he talked about deflationary pressures.  Now he can see that his money printing has led to unintended consequences.  So is he going to wait until the S&P is down percent or more?”

Faber also suggested that his sanguine outlook for U.S. stocks includes an assumption of an impending slowdown in the Chinese economy, where the recent evidence of a “proliferation of fraud on a massive scale” by Chinese companies demonstrate to him a “very clear symptom of a bubble, a mania” in the People’s Republic of China.

Investors in America are “stupid” and don’t see this, Faber asserted.  But in Hong Kong, if the local Chinese get cheated, “you have to watch your kneecaps,” he said, inferring that Mainland Chinese are more apt to try and cheat more American investors instead.

Asked if the commodities boom is still intact, Faber said, “Yes, I like gold and silver, but I think they go down for the next three months, or so.  But I wouldn’t short them, and I keep accumulating gold.”

He added, “Not to own any gold is to trust central bankers, and that you don’t want to do in your life,” he chuckled to end the interview.

China Media Express (PK. CCME), Harbin Electronics (Nasdaq: HRBN), Sino-Forest (PK. SNOFF) are three of several Chinese stocks in question as regulators and independent research firms take action to crack down on alleged fraud.

Here we go! Gold News floods Mainstream Media

After India’s bombshell imports report released on Monday—which showed that the largest democracy on the planet took in 500% more gold and silver as imports during the month of May than it imported in April—mainstream news outlets have posted a few more articles about the relatively quiet stampede (up til now) into (physical) gold.

Today follow-up gold news articles from Monday include three from Bloomberg and one from The Financial Times.

Bloomberg’s article entitled, “UBS Gold Sales to India Rise 23% So Far in 2011; Demand ‘Robust.’” confirms Mineweb’s article on Monday—which originally reported the mind-blowing gold and silver import statistics for India.

“Physical bullion sales in May rose ‘a very substantial’ 76% from the previous month and 161% from a year ago,” according to Bloomberg. So far this year, UBS said that UBS bullion sales to India are already up 22% from the same period last year.

“The value of India’s combined gold and silver imports soared 500%  in May from April, and 222% from May 2010,” UBS’s Edel Tully stated in a recent report given to Bloomberg. “While import volumes rather than values would be much more accurate, given the run-up in gold and silver prices in May, the figures still provide a good indication of the country’s robust appetite for precious metals.”

Another piece from Bloomberg, entitled, “China Central Bank Plans to Double Issuance of Gold Panda Coins,” gives us a clue to retail demand from the people of China.  We know the China’s central bank is on a tear, scooping up domestic mining supply within the borders of the People’s Republic.  It’s been reported that China’s central bank buys all available supply from domestic mining operations.

“The People’s Bank of China said on its Web site that it plans to issue about 1 million ounces of its 2011 panda commemorative gold coins compared with plans at the end of last year for 500,000 ounces of the coins,” according to Bloomberg.

One million supply of Pandas for a population of 1.3 billion?  Now let’s wait for another Bloomberg article which will cover an announcement from the People’s Bank that it ran out of Pandas within the first few weeks of issuance.

China and India have indeed hogged the gold and silver headlines this week. But not to be outdone (let’s say, on a per capita basis) are the good folks from Down Under, who have accommodated those (mostly Westerners) wishing to load up on silver—the second go-to safe-haven currency after gold.  Bloomberg got this story, too, and was very busy uploading all these articles in time for the Greek crisis to head into the final inning deadline of July 3.  The article from Bloomberg, entitled, “Silver-Coin Sales Booming at Perth Mint on Demand for Haven” stated that demand out of the Perth Mint bustles along as it has since the beginning of the year.

“Silver-coin sales from Australia’s Perth Mint, which was founded in 1899 and processes all of the country’s bullion, have surged to a record as buyers seek to protect their wealth with the metal known as poor man’s gold,” according to Bloomberg.

Bloomberg noted that the mint sold 10.7 million 1-ounce silver coins since July 1 last year, according to sales and marketing Director Ron Currie.  “That’s 66 percent higher than the previous full fiscal year and about 10-fold more than five years earlier. Sales of 1- ounce gold coins will be close to a record,” Currie told the leading business media outlet.

And kodos goes to the Financial Times (though, the online journal forces readers to sign up), which reported that Greeks have been dumping euros for gold, recently.  No surprise there.

In the FT article, entitled, “Greek savers rush for gold,” the gist of the article read:

“Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks,” according to FT.

Savers making the switch out of euros into gold has decidedly, it reported.

“When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” Harry Krinakis, at Sepheriades, a Greek precious metals trader, told FT. “Now the sales ratio has reached five to one.”

Wondering why CNBC doesn’t have at least one article about gold’s lure during the protracted and dramatized Greek crisis?  You aren’t alone.  But when it comes finally time at CNBC to broadcast a segment on the gold and silver market, you’ll be sure Steve Liesman will be waiting in the wings to offer the latest talking points hatched from his group of Fed lackeys and wannabes.

Latest Gold Market Shocker: India’s Gold and Silver Imports soar 500%

Recently published data about India imports of gold and silver shocked analysts Monday after India’s commerce and industry minister Anand Sharma released trade figures for the month of May.

Those figures show a 500% increase in May (month-over-month from April) and another impressive hike of 222% from May of last year.  Bullion imports reached $8.9 billion in May, which, if put into more meaningful perspective, represents nearly half of India’s average imports for the ENTIRE YEAR!

The article, first published on internationally recognized source of mining data, Mineweb.com, has since gone viral on the Web within the gold community since yesterday.

“People in India have accepted high inflation as a reality of life,” Rajesh Shukla of the Centre for Macro Consumer Research told Mineweb.  Shukla also noted that Indians turn to gold during times of excessive central bank money printing, and is most likely the cause of the spike in gold and silver imports during May.

India’s craving for gold and silver is beyond outsized, now.  It’s a frightening show of what sheer numbers can do to the short-term (and long-term, in the case of India) of any given market.  What was once pretty much under the radar of Wall Street analysts is now too glaring to miss.  Move over Peak Oil theorists, the Peak Precious Metals thesis could soon spread more quickly now that India has decided to stampede its Indians onto the gold and silver life raft.

Moreover, and probably most troubling to the gold cartel, the latest India import report strongly suggests that India’s 1.1 billion population can break the precious metals market suppression scheme all by themselves without any help from American media, who have been tirelessly urging mainstream investors to accept blindly Ben Bernanke’s dangerous, untested and unsound monetary policy moves.

But the hang up among American investors centers, first, on a prerequisite deprogramming of false economic theory regarding a vital role gold plays in economics, taught in Western-centric colleges, and repeated as gospel from the flock of the high priestesses of Modern Monetary Theory (MMT).

So when Bernanke and his echo chamber at CNBC report on the Fed’s latest actions (and obscuring the primary dealer and accounting fraud), investors believe that, though the economy is “not at full capacity,” we’ve been here before and it’s only a matter of time before we dig out of this hole and create meaningful jobs again.

“The gold story is puzzling” Standard Chartered financial analyst A S Kirolar told Mineweb. “Consumers are shying away from stocks and bonds and heading to safe assets like gold and real estate, but one cannot understand this given the meager 12% growth in imports of petroleum and oil products.”

As Western-trained analysts remain puzzled from the recent “unexpected” demand for gold in India, Indian authorities, on the other hand, aren’t confused at all, taking steps to open the gold spigot wide open to accommodate the feverish demand for gold to its people of the world’s largest democracy.

Shivom Seth, the Mineweb author of the article, wrote:

“Analysts maintained that India’s central bank, the Reserve Bank of India’s decision to grant licenses to seven more banks to import bullion has helped push up demand. Karur Vysya Bank, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, Punjab and Sind Bank, South Indian Bank, State Bank of Mysore and Seth continues:

“As of the start of 2011, some 30 banks in India have been granted permission to import gold and silver. Jewelers are getting easy supplies which is also helping push up demand. Moreover, the flow of scrap is also expected to fall from a yearly average of 200 tonnes, which could again boost imports, underlining the insatiable appetite of the Indian consumer.”

Adding that latest report out of India to the gold story emerging out of “Communist” China, then the verdict on the value of gold to investors is taking shape: No matter what a people’s political ideology or cast, the people want to hold gold—especially during times of government theft of purchasing power.

Don’t Trust the U.S. Government, says Marc Faber

Speaking with UK-based financial magazine, Money Week, famed Swiss investment manager Marc Faber said America needs to experience “a devastating crisis” before real growth and jobs can be created.

Foretelling the inevitable burst in debt several years before the collapse of Bear Stearns, Faber’s has gained a reputation as someone who is able to spot the effects of years of mal-investment within the U.S. (and globally), dispassionately, while others cannot, or won’t.

As today’s disciple of the Austrian School’s Karl Menger, Ludwig von Mises, and Friedrich Hayek, Faber’s track record of “getting it right” has amassed him a huge following of investors grown weary of the 1984-like communications and deceptive practices of the U.S. government and its financier cohort, the U.S. Federal Reserve.

Faber’s forecasting record and delivery style on the deteriorating state of the U.S. has taken on a air akin to the counterculture revolutionaries of the 1960s but with a viewpoint more focused on financial and economics matters—ironically, maybe, directed to the same a demographic most affected due to inability to recover in time for retirement—the Babyboomer.  Faber, himself, is 65-years-old—another Babyboomer who still sports a ponytail and distrusts those in authority to take selfless actions for the sake of the greater good.

Faber told Money Week that the debt hasn’t gone away in the U.S.  Instead, it’s grown much larger but shifted into the form of public debt and away from the ones who created the original oversized debt load in the first place.  And the only way out of a default (either outright, or through inflation) is “to impose a flat tax and cut government expenditures by 50%.”  But only a financial catastrophe would affect those cures, he said.

The consequences of attempting to solve a U.S. solvency crisis with ever more debt from Treasury and the Fed doesn’t have Faber chanting the “king dollar” mantra on public airways to millions of U.S. viewers each day on programming outlets such as CNBC.

He points out that in dollar terms, the rebound in the S&P from the March 2009 low appears to some investors that an economic rebound in the second half of 2011 and 2012 is expected.  But when the S&P is priced in other currencies, such as the Swiss franc, Australian dollar, Japanese yen, as well as the monetary metals, gold or silver, equities have dropped from 50% to 80% since the market peak of 2007, he said.

Of the various forms of protection from future dollar declines, gold is his favorite.  Gold (and silver) doesn’t have a constituency to placate, especially as it relates to the U.S. dollar.

“Not to own gold is to trust the value of paper money and the government’s integrity,” said Faber.  “No one in his right mind could trust the U.S. government any more.”

And finally, Faber shrugs off the talk of a gold bubble.  He insists that the bubble is NOT in the gold market.

He said the world is, instead, “grossly underweight gold” but “flooded with U.S. dollars.”

Lehman-like Meltdown Looms Large

Greece may be a small European nation with small financial problems when compared to a backdrop of a quadrillion dollars of accumulated global debt (according to the Bank of International Settlements), but Greece has also become the litmus test for the resolve of political leaders to fix the problem with the euro and its dependent counter-parties worldwide.

As the pressure from the IMF on the Greek president intensifies while the crowds on the streets of Athens grow in size and violence, traders have been monitoring sovereign debt interest rates for signs of contagion amid the crisis in Greece.

Signs have appeared in the European bond market, whereas the yields on Greek, Irish and Portuguese 10-year sovereign debt have all surpassed the 10% print, with all three moving higher every week to levels which are now higher than the lofty rates of March 2010 when the Greek crisis emerged in earnest.

What everyone seems to fear is another Lehman-like meltdown.  And for good reasons, too.  But this time crisis could be much worse.  A major financial institution failing is one thing.  It’s together another story if the ones doing the bailing out need bailing out.  And as the crisis deepens, the loan amounts grow while the number of pockets left to guarantee the additional debt grows smaller and smaller.

Germany and France are financial backbones of the EU, and both countries’ politicians feel pressure from those determined to keep the euro together as well as from constituents who want nothing to do with bailing out “lazy” Greeks.

Asked if the markets need to fear a Greek debt default, Belgian finance minister Didier Reynders told Belgium’s RTL Radio, “We can indeed fear it because that’s what we experienced in 2008.”

“Remember — the collapse of an American bank, Lehman Brothers, Reynders continued.  “Everyone said ‘OK, a bank’s gone under.’ But that triggered a collapse in confidence right through the financial sector and banks could no longer borrow money amongst themselves. And we saw what that meant.”

Reynders warned of a repeat of another contagion if Greece, the EU, and the IMF cannot come to a deal on tranche number two of the original Greek debt restructuring agreement reached last year—which Greece had failed to achieve key financial metrics stipulated within the initial terms for a second tranche.

“If we turn our backs on Greece, it won’t be able to repay its debts to banks and therefore savers in our country (and savers, globally),” he said.  “The domino effect will begin and there will be consequences in Ireland, in Portugal and perhaps even here (in Belgium).

A collapse of Greece and the contagion that is sure to follow could happen “tomorrow,” bullion expert Jim Sinclair told Eric King of King World News.

“It’s just that bad . . . this thing can blow at any time,” Sinclair continued.  “Wiemar Republic had no more problems than we have right now.”

The saga in Europe continues next week as German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today before they head off to an EU summit scheduled for next week.  Merkel wants one-third of the bailout package to come from banks, while Sarkozy’s French banks seeks a resolution as well after downgrades of French banks were issued by credit rating agencies this week.