Are you keeping an eye on GOLD? The time is now!
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Submitted by: Borisimo  Subscribe to this Author Paste this code into your site to promote this story! |
Type of Content: Article Here is a letter I wrote quickly to sent to a friend who had been thinking about shorting gold recently. I hope you enjoy it and I look forward to reading your comments. Boris in Miami Real inflation is eating away liquid assets, and that there are no fundamentals to reinvigorate the stock market in the near future. Many people are investing their assets on dividend paying foreign markets to avoid the American collapse, but as you know; when America catches the flu everyone sneezes. Which brings me to my point: Financially it has always made sense to keep at least 5 to 10 percent of one's portfolio in metals. To me, that that advice is today as timely as ever. Last we spoke you told me that you had decided not to short the metals, and now it seems that it was a very smart decision. Even under attack by the IMF, gold has had a substantial jump up. All the fundamentals seem to be aligning in favor of gold; loss of credibility in the dollar, hyper inflation, historically expensive commodities, limited production, today's gold price is about 45% of its highest price ever if measured on inflation adjusted dollars, markets around the world are settling for what appears to be a long rest, and real estate is still historically overpriced. To understand the risks associated with gold we must understand that the main danger to its price continues to be mass sale of it by government bodies such as the World Bank. But with central banks printing as much bail out money as they are, much of that money will go to absorb those sales; New money has few places it can go to now. With historical prices as indicators, and inflation cranked up to high, metal prices don't have much downward space to go to, and at least 50% space to go higher (based on max historical price adjusted for inflation). If I'm wrong and the economy recovers quickly, losses on the basic metals will be limited. If the analysis above is right price of gold will go up substantially and help shore up some of the losses in other sectors. Consider this email just a gentle reminder to keep some metals in your portfolio. Your friend, Boris Disclaimer: Above is not financial advise or otherwise. Above essay was written for recreational purposes only. Use the information above at your own risk and always verify the data yourself or consult a professional.
Created 27 weeks 4 days ago
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Gold makes up about 1/4 of my portfolio. I put it there mainly for lack of a better place to put it. The stock market is overvalued. Dollars are constantly losing value to inflation. And there is always the possibility that banks could go belly up, FDIC or not.
Personally I think gold is over valued too. The cost to mine it is far less than the current price.
I don't know how valuable it would be in times of extreme economic distress either. Its been many years since gold was money and most people probably don't think of it that way. Besides you can't eat it or put it in you gas tank. So its only worth what someone else is willing to give for it.
Some traders will trade off of the direct correlation between the price of Gold and the price of Oil. while oil has steadily increased, gold has has a correction downward.
I personally think that gold is a good investment, but I think that one should mix the investment with silver on an equal dollar basis. And I personally believe that one should physically own the metal, not put it in a safety deposit box, or have a company store it.
Here is a website of an experience silver trader: http://www.silverstockreport.com/
I have found his comments to be on track.
I have been mainly reminded by your comments and emails of mostly these three things:
Not to forget silver.
The long untarnished history of gold.
The freedom education dividend.
But mostly, not to forget silver.
Thanks!
Boris in Miami
PS (good point Kyo, one should physically own the metal)
He has been saying gold is still going much higher right through the dip back to 868. It is no accident that he ended up being Ron Paul's economic advisor, although Schiff said that Ron Paul was the only candidate that didn't need an economic advisor. He was on Cavuto yesterday, although Cavuto was out and some British guy was filling in. The guy was being kind of a jerk to Schiff, and actually Schiff was a little less patient himself than he usually is. To make a long story short, the guy kept pressing Schiff to predict the stock market's bottom. Schiff said, "it's going to be worth 1 ounce of gold. I don't know where those numbers are going to meet, but they are going to meet."
This guy was predicting the crash of the NASDAQ in 1996 and the crash of the housing market in 2002. he also has a special on You Tube called "America's Bubble Economy" or something like that, so you get an idea where he stands. He has mentioned gold at $5,000 before, and from anyone else, I would be ringing the loony bell. I could see the market and gold meeting at $5,000 - that's where the market should be if it were trading at 14 times earnings (and those earnings were real). The dollar is definitely going south, so this is not the top for gold. Adjusted for inflation, it's all time high is over 2,200, and that was with a much stronger US economy and a much stronger (relatively) dollar.
Tom Mullen
www.tommullen.net
www.myspace.com/skepticsongs
chart of interest for you.
http://home.earthlink.net/~intelligentbear/com-dow-au.htm
Mark Faber and Bob Prechter are also believers in the dow/gold ratio .. that bottom will be the mother of all time to buy equities.
With the Fed comments on Wednesday leaving everyone scratching their heads and saying wtf, it was the perfect setup for a pop... the Commanders at the Fed are keeping an eye on the yellow metal... and there was once again a lone dissenter in the rate decision... Looks like the Fed is just buying a little more time for the brokers and banksters to get there books in order..Gold broke the wedge yet hasn't surpassed the April and May highs and now sits firmly on the 50% fib... thats right where it failed to rally in May. April high which is the .618 fib is critical and I would expect some type of rumors or surprises when it gets to that point via the Gold suppressors.... A surprise rate hike? hmmm
The dollar although it lost a bit of ground the last couple days is still putting in higher highs and higher lows since March.
Equities generally rally into short holiday weeks and gold is s/t overbought. So I would "expect" a slight correction in Gold and a small rally in equities. There "appeared" to be a bit of short covering in tech the last couple hours on Friday and much of the selling in equities could be related to end of the quarter re balancing. Even with the Dow at new lows.. non confirmations all over... S&P with all the financials is still above the March lows as is the Nasdaq ....either they have a bit a catching up to do or it is, as I said,, a non confirmation.. and look at those Transports.. still way up there.. enough trader talk for now.
That is the advice I follow and give to people when asked about metals.
Junk silver refers to silver coins - usually dimes and quarters - circulated before 1965. They were 90% silver.
I like to pick some up when I have a couple of hundred extra dollars. They are easy to keep, you don't have to worry about their proof value and they will be real money when times get tough.
I believe the upside for silver is greater than gold.
There will be a time to short the metals - but not yet.
I have dabbled in gold and silver options and futures and I am always reminded of the line used by a broker I knew.
If you want end up with a million dollars trading futures - start with two million.
"Too much gold like too much sun. Makes men blind" - Tarzan.
Gold and silver has been there from the beginning. Gold and silver will be there until the end.
Real money, not pretty paper or numbers in cyberspace.
This is a buying time. I agree with you that gold and silver can't go very far down, before they start their trip to the moon.
I forgot to mention "The revolution and its education dividend".
So many people are waking up because of the "revolution" and their enlightenment on financial and economic matters that, pressure has started to build for a return for a gold standard.
Many of those newly woken people understand the fundamental value of gold and will buy it to protect their financial future, and will urge the governments to buy it to shore up their currencies.
It is heart warming to know that some part of the revolution will pay us dividends.
Boris in Miami
Many of you guys are gold bugs. Please tell me if any of the information in the essay above is wrong of misleading. Finally I think I'm getting the hang of the fundamentals of gold pricing, but you guys might see angles I don't see, so please let me know.
Thanks,
Borisimo