Rick Rule - Expect More QE to Send Gold Prices Soaring

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/1_Rick_Rule_-_Expect_More_QE_to_Send_Gold_Prices_Soaring.html

“Well the positive part is pretty obvious, it looks like in both Europe and North America the trend is towards more quantitive easing.  More purchase of bogus securities by the central banks through the issuance of phony paper.  What they call quantitive easing Eric, you and I would call counterfeiting.”

“They are printing more currency units and those currency units aren’t covered by the utility generating capability of the economies that use them.  In other words the value of the goods and services produced by the European and North American economies aren’t increasing, but the number of currency units, either dollars or euros that  they issue, are growing. 

In the case of gold, as dollars become worth less, the nominal value of gold increases.  While I don’t expect that this process will be a straight line process, meaning there will be plenty of volatility to scare the heck out of your readers, the trend nevertheless is towards more inflation, more counterfeiting and at least higher nominal gold prices. 

I suspect there will be higher real gold prices as well because I think that the fear buying that accommodates the phony and fraudulent issuance of currency will be accompanied by greed buying as speculators crowd into a gold market that is showing some momentum.  So I think the two primary investment motivators, greed and fear, will combine to take the gold price much higher....

“We are finally beginning to see the cash generating capabilities of these companies at higher gold prices.  Whereas last year industrywide free cash flows were in the $2 billion range, this year they should be in the $5 billion range. 

In addition to reassuring investors that free cash flow will allow the companies to engage in merger and acquisition activities, it will also allow the funding of greenfield and brownfield projects, which will further grow their production and consequently further grow their cash flow.

So I think in the next three to six months the gold shares will outperform gold as a consequence of merger and acquisition activities, by corporate performance itself and of course by this discovery cycle we’re talking about.  Finally Eric, some relief for your junior gold stock buyers.”