It’s been thirty years since the last great gold bull market. The market we are currently in, however, looks nothing like the last. The seventies gold bull was prematurely chopped off at the knees when Fed Chairman Paul Volcker called a Saturday night news conference on the 6^th October 1979  – “the Saturday Night Massacre” – announcing that he would lift the discount rate to 12% in order to starve off rampant inflation. By January 1980, gold had hit an all time high of $850, but was soon to be sold off as the US dollar’s condition became stable on the life support system of higher interest rates.

With global monetary aggregates today, being many orders of magnitude above what they were back then, a Volcker style solution in today’s world would call in a global bankruptcy overnight. That’s not to say the world isn’t already bankrupt, rather that the money printing and zero interest rate policies postpone that inevitable day of reckoning, granting the global bureaucrats and the financial movers and shakers of the world, more time to plan and restructure a new financial system. With this is mind, it’s clear that the seventies gold rush will pale in comparison to the new gold rush which is still in the making. We need to wind the clock back some 160 years to get a feel for what’s in store this time around. The last time a true case of Gold Fever gripped this country, it transformed the national physche:

A complete mental madness appears to have seized almost every member of the community. There has been a universal rush to the diggings.

- Bathurst Free Press 1851

Richard Russell talks gold fever in his latest commentary as posted on the King World News Blog:

This great gold bull market is something that one sees maybe once or twice in a lifetime. I want to congratulate those of my subscribers who had the confidence and guts to ride the great gold bull market with me.

I've said before that we've already gone through the first psychological phase of the gold bull market, and that we're now deep in the second (usually the longest) phase of a bull market. If my instincts are correct, the third speculative phase in gold lies somewhere ahead. Forget timing for the third phase, it doesn't matter -- somewhere ahead new comers will know the meaning of the phrase, "THERE'S NO FEVER LIKE GOLD FEVER." Often during the third phase, the item makes more for investors than all their profits through the first and second phase.

When the primary bear market started, I said that the primary trend will have its way no matter what, and that the best strategy was to leave it alone and let it fully express itself. "No, no," insisted Bernanke and the administration, "We know how to circumvent a severe recession or another great depression, we'll spend our way out of it."

The result -- the Bernanke Fed and the Obama administration (Keynesian advisors Summers and Geithner) are destroying their own fiat dollar. In the end, they'll have done much more damage than another great depression would have done.

Those who claim that we're in a new bull market don't understand what is actually happening. We're in a subtle bear market in purchasing power as our currency goes down the drain. And what if the dollar loses its reserve status and nobody will accept the fiat paper that we grind out? Talk about trouble, we haven't seen trouble yet.

In the face of the destruction-of-the-dollar path that the Fed and the Obama administration have followed, the best way to save our purchasing power is by owning the only true "safe-haven" currency, and that currency is gold.

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