Gold… Next Stop $850? Hong Kong Thrives, Milk Prices Double, A Hybrid-Car Play, and More!

The dollar, conversely, continues to languish.
Its benchmark index slouched toward 77 over the weekend, deepening an already 15-year low. The euro and pound are trading at $1.41 and $2.02, respectively.

“With the falling dollar,” writes Bill Bonner, “down goes Americans’ real wealth. From the time the dollar traded for 88 cents against the euro until today, an American has lost nearly 60% of his purchasing power in Europe.

“In the gold market, he has lost even more; his dollars from ’99 will buy only one-third as much of the metal. At the gas station…his purchasing power is similarly reduced. And now, foreigners are buying up his assets at cut-rate prices.”

BHP Billiton, a company in the Strategic Investment portfolio, may have found what could be the world’s biggest gold reserve
. Sources down under await an update this Wednesday on BHP’s Olympic Dam mine — Australia’s largest resource pit.

“Olympic Dam could turn out to be the most valuable ore body in the world, ounce for ounce, shovel for shovel,” says Dan Denning, Agora’s Australian investing counselor. “BHP has an embarrassment of riches. Its iron ore properties benefit from China’s growth. Its uranium resources are a real asset during an energy bull market. And now, BHP is announcing what could be the world’s largest gold deposit ever.”

BHP stock jumped over 5% on the news and continues to march higher before the announcement. Since being added to Strategic Investment in 2004, the stock is up 260%.

Not much happened with U.S. stock markets on Friday.
The Dow and S&P edged up about half a percent apiece. The Nasdaq was the big winner, with a whopping 0.6% jump.

Foreign demand for long-term U.S. securities fell off a cliff in July
— down to $19.2 billion, from $97.3 billion in June. At the same time, short-term securities skyrocketed… up to $103 billion, from $34 billion in June.

“The long-term money is scared inflation is going to kick in,” writes Chris Mayer, “so they go for the ‘safer’ short-term stuff.”

“Europe sucks,”
Chris told us he muttered by accident in a radio interview last Friday. “I instantly regretted saying something so crude on national radio, but it was too early in the morning for me to focus.” He and the host were discussing the prospect of the euro becoming the next world reserve currency.

“Of all the places in the world to invest,” Mr. Mayer then explained, “Europe would be low on my list. I’d rather invest in North America, Asia or South America. I’d rather be in Australia. I think it’s a tossup with Africa. Europe is a museum. Great to visit and a wonderful place to live, I am sure. But as an investment destination, the best action is elsewhere.”

Meanwhile, “The Hang Seng Index has jumped 26% in just over 26 days,”
reports Christopher Hancock. “The reason: Beijing now grants Chinese citizens access to the Hong Kong stock market.”

We reported the agreement between the mainland and Hong Kong last month. Chris, in turn, squeezed three months worth of Free Market Investor picks into the August issue… in less than a month, they’re up 5%, 14% and 12%.

“But this market has room to run. Here’s why:

“1) The Federal Reserve: The Fed cut the interest rate 50 basis points last week. Remember, the Hong Kong dollar remains pegged to the greenback. This means Hong Kong dollar interest rates are closely tied to U.S. rates. A rate cut here should bode well for Hong Kong property stocks.

”2) Asian Development: Asia can now weather a slowdown in the U.S. A U.S. recession coupled with a 10% slide in the dollar would cut growth by only 2 percentage points.

“3) Evading the Estate Tax: Money will flow where it’s treated best. You won’t find any other place that treats money better than Hong Kong. The highest tax bracket comes in at 17%. Individuals are assessed only on annual employment income. Dividends and capital gains are not taxed.

“When you consider Hong Kong provides arguably the world’s greatest municipal services in a relatively crime-free environment, you’ll be hard-pressed to find a more favorable tax policy anywhere in the world.”

There’s still time to get into these stocks before the boom really kicks in. Click here to learn how.

“Hybrid electric vehicles will account for a staggering 80% of all vehicles sold by 2015,”
says Bulletin Board Elite’s Greg Guenthner, citing a recent Booz Allen Hamilton study.

“About 228,000 hybrid electric vehicles have been sold so far this year in the U.S. That’s no great feat for a country that usually sells 1-1.5 million cars and trucks every single month.

“Next year, however, there are 17 hybrid electric models on the market. In 2011, there will be 65. The list could grow, as more models are planned.”

Gunner’s mircocap strategy for this coming boom? Batteries.

“If hybrid electric vehicles are the future of personal transportation, lithium ion batteries are the future of hybrid electric vehicles.” Lithium ion batteries — already popular in high-end electronics — are typically smaller, lighter and more powerful than conventional batteries. Gunner’s latest pick claims to have reduced battery size by an amazing 50%… that could spell a whole lot more power in hybrid cars. Learn more here.

The Department of Agriculture reports milk and dairy prices have doubled since last summer.

As the middle class in China, India and the Middle East grows, they eat more dairy products. Global demand is surging. For the first time in decades, supplies of milk powder are dwindling beyond a surplus.

“Skim milk powder’s price was the first to increase among dairy products,” Hans Holtorf, a German dairy manufacturer, told NPR’s Morning Edition. “Then retail prices went up. Then, suddenly, there was a butter shortage, [and] cheese [prices] went up,” Holtorf says. “And by now, prices for wholesale products have also gone up. The question is how long this will continue.”

“This chart of wheat in gold adds credence to Kevin Kerr’s view that grain prices have a lot of upside,”
writes Charles Vollum of pricedingold.com.

“Wheat would have to rise almost 50% in gold grams, just to return to its highs of 2003,” says Charles. “Are we having fun yet… or what?!?”

Kevin picked up wheat calls for his Resource Trader Alert
subscribers a month ago in spite of an 11-year high in price. A week later, they sold half of their wheat position for 146% gains.

“For whatever reason,” comments a reader, “the Canadian dollar has reached parity with the U.S. dollar about every 30.5 years: 1946, late 1976 and last week.
One might also count 1916, since the Canadian dollar is reported to have held fairly close to parity after coming off the gold standard in 1914.

“This time, the Canadian dollar might not slide the typical 10-20% within three years after reaching parity, as it has in the past. The U.S. is not as dominant a part of Canada’s trade, as it has been in the past.”

Cheers,

Addison Wiggin
The 5 Min. Forecast

P.S. Our Maniac Trader has been on one impressive winning streak this month.
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