BY Craig R. Smith, Chairman, Swiss America
& David M. Bradshaw, Editor, Real Money Perspectives
June 7, 2010
"Gold is as much about investors' state of mind as it is about the status of mines. It is a set of beliefs and a world view as much as it is a shiny, malleable metal." -JON MARKMAN -MSN, 12/05
Investors worldwide are seeking safe havens from economic uncertainties. The commodity super-cycle has swept gold prices up fourfold since 2001. But that's just the kickoff phase, according to scores of gold analysts and experts.
Recent media warnings about gold prices always seem to arrive right on cue: immediately following new nominal price highs. These gold bears said to forget gold at $500, $750, $1,000 and now $1,200/oz. They have called gold the new "bubble" at each new level and they have been proven wrong each time.
These relentlessly anti-gold prognosticators always "ignore gold when it is at the bottom," writes economist Gary North. "They ignore it when it has doubled. When it has tripled, they write articles on why it's not a good investment, because it is overbought. When it has quadrupled, they call it a bubble."
Gold, of course, is not immune to price corrections - seven major ones in as many years to be exact - but the secular bull market in precious metals rages on. All investments have risk, including precious metals, but metals have proven to be the best investment of the 21st century in part due of their periodic price consolidations.
For example, after surging above $1,200/oz. in December 2009, gold prices corrected back to $1,060/oz. on February 4th. Since then, prices have steadied near $1,200 as shaky currency and sovereign debt worries threaten to spread worldwide and crush a fragile economic recovery.
Please do not be distracted by media hype over gold's periodic corrections or a purported gold "bubble." Instead, keep your eyes on the facts and focus on fundamentals.
Following each of the last six major corrections, gold prices have risen an average of 36%. While past price movements do not always foretell future movements, we could easily see prices rise above $1,400/oz. in 2010.
YES ... GOLD AT $1,200/OZ. TODAY REPRESENTS AS GOOD, IF NOT A BETTER VALUE THAN AT $600/OZ. BACK IN 2006 FOR AT LEAST FIVE GOOD REASONS.
1. GOLD: RISK VS. REWARD RATIO
2. GOLD: FILLS THE CONFIDENCE VOID
3. GOLD: PRICE REFLECTS FAIR VALUE
4. GOLD: NOW ACCEPTED AS MONEY
5. GOLD: HONEST MONEY, COINED FREEDOM
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5 REASONS WHY $1,200/oz. GOLD IS A BETTER VALUE THAN $600/oz.