Greg McCoach Sees $1,500 Gold This Fall
Source: The Gold Report 09/22/2009

Post summer doldrums, we're now beginning to see a nice fall run up in the price of gold—one that marks the beginning of a parabolic move, according to Greg McCoach. The seasoned bullion dealer, investor and newsletter writer sees a number of factors culminating in ever-increasing prices going forward. In this exclusive interview with The Gold Report, Greg reveals current and forthcoming events that will continue driving the yellow metal's price northward. . .not the least of which involves the commercial real estate market and its "associated derivative sewage."

The Gold Report: Greg, gold has really started to take off. You've talked about a parabolic move for gold. Are we in the beginning of that?

Greg McCoach: Yes, I would say so. I've been anticipating a nice fall run up. We knew we'd experience the typical summer doldrums, but a couple of things are happening right now.

First, you've got the major gold traders coming back from vacation and starting to make some trades. But more importantly, there were two major announcements in the first week of September that could really launch gold. We could see $1,500 gold this fall. No doubt about it.

TGR: What two announcements are those?

GM: First, the Chinese, in layman's terms, put a stop loss on their derivatives, which they're taking a bath on. These were sold to them from the likes of Goldman Sachs. This is a huge development. In other words, the Chinese are basically saying it's a fraudulent transaction—which it was. Goldman Sachs sold these same instruments to Iceland and what took the country down were the derivatives, right? And the people that created these derivative packages and sold them to others like Iceland and China knew full well that they were flawed, that there was no way these people were going to make money on them. So, knowing that, now the Chinese government says we are putting a stop loss on our losses on these instruments and we're simply not going to pay anymore. So that's good. Somebody's standing up against these corrupt jerks who have been taking advantage of other people.

That was a big development and, if you notice, there's been a lot of discussion. Independent-thinking kinds of newsletters have been talking about this and, so, we've seen gold start to rise up.

The second big announcement is that the Hong Kong Monetary Authority has built its own high-tech vault to store its own gold, and they just requested delivery. Up to this point, the Chinese gold had been stored and vaulted in London, England. So now the Chinese are requesting their gold be shipped from London to their new vault in Hong Kong. This has major implications because this is a large amount of physical gold, and I think what it's going to do is begin to expose the naked shorts who have been playing this game with the gold and silver markets, trying to keep a cap on the prices. So this is a major, major development.

TGR: Why would moving gold from one vault to another vault expose the naked shorts?

GM: Because they won't have access to that gold. In other words, the shorts, in order to keep a lid on the gold prices, can't control the gold price. This goes into the manipulation. I don't talk about this too much just because, to me, it really doesn't matter. In the end, manipulation never works and free markets eventually overcome any manipulative activity, and gold and silver will go to where they're going to go. But in this case, the way they've been able to play this game over the years—and it's been going on for a long time—the manipulation crowd could short paper contracts of gold and silver with huge amount of paper contracts. They didn't have the physical metal to deliver in case the longs decided they wanted delivery. They would get caught if they didn't have enough physical metal to meet those demands.

So I think it really means that the whole situation of manipulating and playing games with the gold and silver markets just puts even more pressure on it when people start taking delivery of their gold. We all know that the manipulation game will be over at some point when there's no gold left to play the game. Then the manipulation crowd has no ammunition to play and that'll all go away.

TGR: Is this what's really causing the parabolic move for gold or are there other factors?

GM: No, there are other factors. This is just the starting point. What I'm saying is we're starting to see gold ramp up. The bigger factors are the derivatives associated with the commercial real estate market. I think that's going to start to blow up this fall and into early next year. And that's because the commercial real estate market and its associated derivative sewage is much larger than the derivative sewage associated with the residential real estate mortgages that went bad.

We're going to go through another round of this. This round looks like it's going to be worse than the last round. And any hogwash about people thinking the economy is back on track and all this stuff from Joe Biden that a million new jobs were created, that's just nonsense.

TGR: Would you anticipate the market to crash like it did last year as the residential real estate bubble burst?

GM: Here's the different scenario that I see. Yes, it's going to affect markets—stock markets will plummet worldwide; but I think it will be different for the precious metal stocks. The mining stocks and precious metals got sucked right down the toilet in the last meltdown. That was unexpected. The reason for that was that all the big hedge and index funds had to liquidate, and they were heavily invested in precious metals and junior mining stocks. So, as that crowd had to sell to raise cash for their clients who were sending in their redemption notices, that's what hurt us.

This time I think we will get the disconnect. I think precious metal prices will soar to new highs and people with money will flock into the precious metals and the mining stocks as a refuge, as a safe haven. Yes, it'll affect world markets again, but I think the precious metals will have an insulating protection because people will finally start to realize that precious metals are where you need to be. There will be a new interest and a beginning of a big flow of money into the precious metal sector.

TGR: So if that's true, won't all boats float up if precious metals start to take off? Won't all juniors see appreciation in the stock price?

GM: When the market kicks into gear, the money goes first into the majors, then the quality juniors, and then eventually—you know, even turkeys can fly, right? The more quality-oriented companies will definitely be the bigger recipients of the best funds because people are more selective now than they were before.

Since the last meltdown people have definitely gotten more educated in certain areas where you have to be. You can't just put your money in a mining stock anywhere in the world. It has to have infrastructure. If it's in an existing mining camp, that's better than in an area that has no infrastructure and no mining camp. Why? Because the developmental costs to put something into production are so much higher in those kinds of areas.

So smart money people are looking for new discoveries in existing mining camps, where all the infrastructure exists. So those will be the companies that make the big runs, and that's what I'm focused on right now. That's what I've been focused on in the newsletter—looking for these opportunities.

TGR: What's your recommendation about owning physical metal vs. equities? And should the mining stocks be in the major, juniors?

GM: I always recommend owning the physical metals, gold and silver, the bullion bars and coins and the mining stocks. Now for some people, the majors work better for them and their portfolios than the juniors. I personally like the juniors because of the leverage. When someone makes a discovery, as a junior you can make up for a lot of losses very quickly with just one discovery, if you own the right junior mining stock.

So we play the odds; we know we're not going to win on all of these stocks. But in a good market, where we see a parabolic move, hell, everything's going to move. We're hoping to have some of those that do those big moves and everybody's happy and we'll take our profits and buy other real assets. At that point it could be undervalued real estate, it could be undervalued ranch land. I'm only willing to give up my precious metals and my precious metal mining stocks for other real assets because I don't want to hold dollars at this point. I'm not interesting in holding U.S. dollars in quantity.

TGR: Especially if they're going to be losing value.

GM: Right. A U.S. dollar devaluation at this point is as certain as death and taxes in life. We just don't know the exact timing; that's all. ...article continues...

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