XMFSinchiruna (28.56)

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Bernanke Ignites the Gold and Silver Rocket

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November 08, 2010 – Comments (18) | RELATED TICKERS: RBY , AXU , CDE

Ladies and gentlemen, we have a confirmed liftoff.

As the only currency not subject to intentional debasement or counterparty risk, gold continues to serve its historic role as the ultimate barometer for impairment among fiat currencies like the dollar. Bernanke's predecessor Alan Greenspan has called gold "the canary in the coal mine," stating that "gold still holds reign over the financial system as the ultimate source of payment."

Over the weekend, World Bank president Robert Zoellick ruffled more than a few Keynesian feathers when he championed a new global currency regime that would "consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values."

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On the heels of Bernanke's unveiling of the "QE2" money-printing blitz, I see strong potential for gold and silver prices to continue through near-term price targets of at least $1,500 and $30 per ounce, respectively, before the onset of another inevitable correction. My long-term price targets for $2,000 gold and $50 silver remain unchanged since 2007, though frankly they begin to appear grossly conservative the more this disappointing forward trajectory of the U.S. dollar comes into clear view.

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Those searching for outsized gains that have yet to materialize may wish to give gold explorer Rubicon Minerals (AMEX: RBY) a close and timely inspection. Rubicon is a top-ten holding of the new ETF, and has been discovering ultra-high-grades of gold within the F2 gold system of its Phoenix project in Red lake, Ontario, throughout the several years that I have held the explorer's shares. At long last, the company is preparing to release an official resource estimate for the F2 deposit sometime in November, and I suspect the market will be pleased with the scale of the deposit once revealed.

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Coeur remains somewhat choked by debt and royalty obligations, but a considerable growth spurt combined with rapidly declining costs signals a robust recovery to this embattled and Foolish shareholder. With nearly 270 million ounces of silver in reserves, and another 180 million ounces in measured and indicated resources (not to mention 2.9 million ounces of gold in reserves), I still detect a strong pulse in this hitherto underperforming miner. As an example of the operational improvements under way at Coeur, the company managed to abruptly reduce costs at its Palmarejo mine from $10.78 per ounce in the second quarter, to an attractive $0.15 per ounce in the third quarter.

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Bernanke Ignites the Gold and Silver Rocket Surge

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