More on Gold

For those of you new to my writings you may be unaware that I’ve been bullish on investing in gold since 2001 when the price was only about $270/oz. In fact, on my first appearance on the Fox News channel in December 2002 (you can view the clip, and all my appearances in the WAM in the Media section of my website: www.waminvest.com), one of my recommendations was Newmont Mining, then trading for $29.34. Today, it’s $57.10 and has been paying dividends for years. For more than a decade I’ve been recommending that my readers buy gold. I starting buying silver about four years ago. I’ve put my money, and that of my clients, where my mouth is as I own a number of gold mining stocks (including Newmont which I’ve never sold), mutual funds and ETFs. In fact, I’d say my clients have had a 10% allocation to gold and silver for years. So I’m no newcomer to this sector play. 

Thanks to the actions of the Federal Reserve I’m more convinced than ever that the prices of gold and silver will continue to rise. It’s reasonable to think that sometime next year the price of gold will surpass $2,000 and silver will be north of $50 as our government, and by extension the Fed, lead us down a torturous path of monetary ruin. Yes, all the quantitative easing policies have helped to prop up the stock market. But while that’s temporarily pleasing, those same policies are likely just inflating the next big bubble that will invariably pop, causing even greater harm than the weak economy they’re purported to stimulate.

Beware the free lunch. Everything that goes up must invariably come down. The same holds true for economic cycles. Busts always follow booms. Recessions clear out the weak and the dying businesses, just like a fire clears out the dead brush in a forest. As long as we (and by that I mean the Fed and our government) plead for useless Federal intervention rather than accept the pain that is normal in any down economic cycle, the future consequences are likely more dire. I’m keeping my gold.