2011-08-31

Bill Fleckenstein - “I don’t believe the gold bull market has ended"


The gold price climbed 2.4% Wednesday morning to $1,832 per ounce on the back of expectations that the weakening economy would prompt the Federal Reserve to initiate more monetary stimulus. After trading as low as $1,783 early Tuesday, the price of gold soared following a CNBC interview with Chicago Fed President Charles Evans. The dovish voting member of the Federal Open Market Committee told CNBC’s Steve Liesman, “the data has been soft” and noted that he “would favor more accommodation.”

Commenting on the recent correction in the gold price – which sent the yellow metal over 10% off its $1,913 per ounce record high – Bill Fleckenstein wrote in his weekly MSN column that “I don’t believe the gold bull market has ended…Having said all that, I would note that the gold market was due for a correction at some point, and it is now getting it. I say, let’s get it over with to clear out the hot money.”

Fleckenstein went on to discuss Ben Bernanke’s Jackson Hole speech and the implications it may have for the gold price. “The much-hyped Bernanke speech at Jackson Hole on Friday was essentially a nonevent. Basically, he said, ‘trust me’ while dangling a carrot by noting that the Fed still has tools available. He also said the September meeting would be expanded to two days so the Fed could think about how it might want to use those tools.”

As for the prospects of a third round of quantitative easing, Fleckenstein stated that “I don’t see how Bernanke is going to be able to hold off until Sept. 20 to start QE3, given how poor the economic fundamentals are here and how even more dreadful they are in Europe.”

Despite the fact that U.S. stock markets rallied following Bernanke’s speech and continued to push higher on Monday, Fleckenstein reiterated his preference for investments tied to the gold price – particularly gold stocks – versus the broader equity markets.

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