DENVER, CO -- Twice in the past few months gold looked poised to clear the critical $690 level and move to yet another new high since this bull market began in 2002. Each time, however, the powerful forces of central banks and their anti-gold allies were able to keep the yellow metal in check with aggressive shorting on the COMEX and negative gold propaganda in the media. While this kind of behavior continues to frustrate gold investors in the short term, I believe a major breakout in gold is looming in the near future.

The reason for such a concentrated effort on behalf of those who desire gold's demise is the attention gold is getting from a growing number of smart money people who are seeking alternatives to the dollar. The flight to safety, away from the increasingly risky dollar (doomed would be the more correct word), is picking up more speed in many investing circles around the globe. The central bankers, who appear more desperate by the month in trying to keep their rapidly depreciating fiat currencies intact, can't have a rapidly rising gold price. Gold is starting to gain some big upward momentum, thus the latest and more pronounced attempts to keep a lid on it.

Fortunately, all of this nonsense on the part of central banks and the media will have no effect on gold in the long run, especially since this manipulative activity requires using their rapidly shrinking physical gold reserves more quickly. At some point in the not-too-distant future, when these reserves are gone, the central banks will have no more ammunition, and gold will move to a much higher level. This event in my opinion is as certain as death and taxes. The moment when there is no more central bank gold to draw on to meet escalating demand will be the straw that breaks the camel's back!

While it is difficult to assess the real numbers for the remaining physical reserves, recent events suggest that we are approaching the point when those gold reserves become depleted. This is why I believe the gold price has been trying to break out. Gold is trying to tell us something.

If you look at what is happening in the monthly gold averages you will see a new pattern developing. At the end of February, the monthly average gold price hit a new high for the first time since September 1980. This is not a misprint. Gold in February on the COMEX averaged US$669.35 per ounce, taking out the long-standing record of US$666.75 per ounce at the end of September 1980. This is a record that remained intact for over 26 years.

And take a look at what happened in April. In the 19 trading days of that month, gold averaged over US$680 an ounce. This to me is incredibly revealing and points to a major breakout in gold. Among all the things I look at to determine what is happening in the gold market, the monthly average price is one of the best indicators. The question is, will we see something happen in the next few weeks, or will we see an uneventful summer with activity beginning to heat up again in the fall?

I don't worry about the short-term implications (next few months) for the gold price, because for me the long-term upside is assured.

Anything can happen in the short term so don't be whipsawed, looking to trade gold/silver. It's just not wise for the average investor. As Richard Russell always says, "Take a position in gold that allows you to sleep well at night and forget about it. Quit trying to trade gold."

The Stumbling U.S. Economy

The acceleration of negative events in the general economy in the U.S. and the world at large continues. The contagion in sub-prime and near-prime mortgages, not to mention the problem of prime and near-prime ARM's that have to be reset in 2007 to the tune of $2 trillion dollars, will grow dramatically in the next six months. I anticipate real-estate prices in the U.S. droppingmuch lower as we move towards the end of the year and into 2008.

This rapidly growing problem more importantly is spreading to other components of consumer debt in sub-prime auto loans and sub-prime credit cards. Recent data suggest an alarming rise in delinquencies with each passing month. Taking it all in, the much-hoped-for "soft landing" in the U.S. economy is nothing but a pipe dream.

Meanwhile, the Federal Reserve morons continue to speak out of both sides of their mouths, saying they are worried about it but continuing to do everything in their power to create massive inflation. The amount of doubletalk coming from all parts of the U.S. government is appalling, not to mention the statistical lies they spew out on a monthly basis. At this point I don't think we can trust anything that comes from the U.S. government.

All we can do as investors is to prepare as best we can by getting out of debt, thinking in more global terms with our investments, and moving away from the dollar and into real assets such as gold or silver. Ultimately, it is about surviving the coming calamities by living well and helping as many other people as you can along the way.

Gold's day is soon approaching and it will play a major role in helping wise investors live well during a time of crisis. There are not many sure investments left, but a proper diversification into gold is something all investors should consider.

Until next time,

Greg McCoach

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