By Craig R. Smith
April 18, 2013
Although we live in an era of instant information and communication; true wisdom, perspective and insight have never been more scarce. Recent gold news headlines again declaring gold is "dead" ranged from absurd to laughable to downright foolish.
As the physical gold dust settles following the largest gold price correction in more than a generation, I am reminded of Proverbs 16:16, "How much better to get wisdom than gold, to get insight rather than silver!"
Today's news media lacks both wisdom and insight on the subject of gold.
The truth is, the world's financial system and central banks have a love-hate relationship with gold. It loves the fact that gold is a trustworthy barometer of the true global financial condition, but hates the fact that gold also reveals the great failure and deception of modern political/economic theory and strategy.
Today I am happy to report gold buying is alive and well! I am proud of Swiss America clients who ran to the phone to place 'buy' orders, rather than listening to media pundits advising them to run for the exits to 'sell'!
It warms my heart to see wisdom in action. That some Americans understand sound money follows sound fundamentals and owning gold follows financial wisdom.
Below are 7 reasons why physical gold and silver coins remain the buy of a generation, as I have said they would be decades ago.
1. Forget the Price of Gold, Remember the Value of Gold
For three decades Swiss America has taught Americans to think of their gold as wealth insurance, rather than a perpetual growth asset. The last decade has seen a transformation in the public awareness of gold ownership from “dead” to the strongest currency on earth.
No wonder the expectation for gold is continued price increases. But as Jim Rogers reminds us every asset, including gold, needs healthy corrections more often than we have seen.
Smart wealth insurance buyers seek the lowest premiums (not the highest) for the best coverage.
2. Ignore Mass Media Experts, They Have Been Wrong for a Decade!
“Expert” gold bears called the bull market dead after last Friday’s 5% decline, sending gold into “Bear market” territory with a total decline of 22% from the 2011 high of $1,891. Then came Monday, with speculators capitulating to margin calls, sell-orders cascaded and gold prices dipped another 7%, resulting in the biggest 2-day sell off since the 1980s.
My response: Big deal! A 25-30% gold price correction back to the $1,325-$1,425 level is a gift for those who have felt priced out of the market. Truth is, this is one of the best buying opportunity of the 21st century!
At least eighty analysts I read are standing firm on their projections of $2,500-$10,000 within years. Why? (see Gold’s Future Bright) http://www.swissamerica.com/article.php?art=04-2006/200604240205f.txt
3. Fundamentals Remain Strong, Economic Recovery Remains Weak
The fundamentals for gold are as solid as ever. Currency wars, unsustainable debt in the U.S. and abroad, stagnate economic and wage growth, distrust of politicians at near epidemic levels and the endless list of failed economic policy. Since 2001 all roads began to lead to gold, unless you really think debt will shrink, the budget will balance, the Fed will stop printing, the dollar will gain value and politicians will stop spending us into oblivion.
Here are 20 reasons to be bullish on gold that we outlined in 2006. They remain the same today.
1. Practicality: Gold is still by far the optimal choice for most sound investors
2. Protection: Likely ruptures in the stability of the U.S. dollar requires protection
3. Profit potential: Gold prices will likely eventually reach well above $2,000/oz.
4. Inflation hedge: The most powerful factor affecting gold is monetary inflation
5. Supply/Demand: 2013 gold supply/demand dynamics: irreversible changes
6. Low risk: Gold's downside risk is paltry compared to the upside potential
7. Privacy: U.S. numismatic coins offer private ownership benefits over bullion
8. Central banks buying physical gold: To diversify reserves away from U.S. dollars
9. China: Chinese continue buying gold / commodities to hedge U.S. paper
10. Ever-growing U.S. entitlements; $50 mill. on food stamps, $9 mill disability
11. Gold is money: Gold now accepted as a global currency (with $, Eu, Y.)
12. Gold going mainstream: The gold market is now being spotlighted everywhere
13. Good timing: Investors should focus on good gold entry points
14. Commodities an accepted asset class: For the first time in recent history
15. Price corrections: A sure sign of a healthy market, always buy the dips
16. Geopolitical risks: Gold/oil prices, nuclear threat and currency wars
17. Gold in your hand: Classic U.S. coins or bullion are liquid assets
18. No liability: as asset without any counter-party risks or debt
19. No gold bubble: 5 years may launch gold above $5,000/oz. say experts
20. True value: Regardless of what the media says, gold offers true value
4. Violating Economic Laws Always Has A Day of Reckoning
Over the last 5 years the U.S. economy has become a debt bubble searching for a pin(head). It may happen this year, or within the next few years, no one knows for sure. Meanwhile the U.S. will gradually stagnate at best, stagflate or hyperinflate at worst – taking the buying power of Americans savings – and our global reserve currency credit card down with it. Just as Roman, Athenian, Ottoman, British and Spanish reserve currencies all have fallen before, as explained in our recent books.
5. Two Types of Gold Investors – 1 Buys Low, 1 Sells Low
When a storm hits at sea there are two classes of people: passengers and the captains/crew. One class runs downstairs, gets sick and hopes the boat will somehow make it back to a safe harbor. They complain, tell everyone to hurry up, are uncomfortable and they wish to be home.
Meanwhile, the captain and crew man the sails, hold the rudder and stay the course. These brave souls will not allow someone else to be responsible for their safety and that of their family. They arrive home safe because they never lost sight of the harbor. Down below is nothing but misery. Up on deck the harbor is in clear sight despite the howling wind and stormy seas.
Fearful passengers can only see the troughs and peaks from wave to wave. But the captain and crew see the bigger picture – which also leads the way home safely from the perfect storm.
6. Do As I Am Doing, Not As Unwise Advisers Are Saying
As Chairman of Swiss America I am leading by example and buying this gold price dip because I know that gold’s 3,000 year old track record of preserving wealth is untarnished – unlike almost every other wealth preserver on earth.
Wall Street speculators have no wisdom when it comes to owning PHYSICAL gold – they never have and never will. Instead they love paper money, credit and debt.
Meanwhile, watch as big and small money quietly begins to pour back into buying physical gold. Let speculators in PAPER gold sell off their Gold ETFs. In the long run smart investors will be rewarded with the benefits of cost-dollar-averaging their gold portfolio in their own favor.
Central Banks in China and India are already scooping up tons of gold at record levels. And in the process they can thank weak-handed speculators and would-be manipulators – and so should every wise long-term gold buyer.
7. "Everybody Wants to Get to Heaven, But Nobody Wants to Die."
-Peter Tosh (1944-1987, Jamaican reggae Musician)
This truism can also be applied to investment wisdom. Everybody knows the smart thing is to "Buy low and sell high." But when a precious commodity and emerging global currency such as gold dips low, most people become afraid to buy it. Why?
Because nobody wants to die. The birth of an investment vision often requires periodic re-vision (read: correction) to stay on course to reach the correct destination. This requires the courage of our convictions, proper analysis of the fundamentals and the patience of our principles.
Those afraid to buy low will spend their lives buying high from others - and never achieve financial independence and freedom.
Learn from history of the last decade, learn the wisdom of buying gold right now!
If not gold, then what other investment over the long run is better and safer? Your money is going to be "invested" in something, even if you hold it as paper dollars stuffed into your mattress.
Your paper dollars are constantly devalued by the Fed's (QE) endless money printing. Inflation will result. Everyday goods prices soared in February at an annualized rate above 25%, yet the world's 'wise men' see no inflation threat.
The investors' dilemma is to sit in a bank at negative returns or enter the stock market casino near an all time high. Following pack-mentality fundamentals and principles is complete foolishness.
Stocks are high because the market is intoxicated and addicted to Fed stimulus money. The market's levitation is a magician's conjuring trick, an unreal mirage.
When the Fed cuts off its economy-distorting drug (printing money) stocks could drop dramatically. But if the Fed keeps injecting ever-larger doses of money conjured from thin air, then the U.S. Dollar could soon die from an inflation overdose.
Either way, this is going to end badly. Both paths lead to fiscal disaster or even depression.
Gold remains the sober investment of choice, with a 3,000 year track record as a safe haven of value when nations collapse and paper currencies burn.
Can you and your family afford to gamble your savings and future by investing in anything riskier and less secure than gold, especially in today's insecure world? A portion of physical gold provides the ultimate wealth insurance.
Today may be your lucky day! Those intoxicated on stimulus money sold their gold cheaply. Their loss could become your gain. Those who sold gold in a panic provide us an amazing opportunity. Let's seize it now!