Over the past week, gold dropped from more than $1,400 an ounce to about $1,360 an ounce today. The pundits are panicking... Yesterday, when gold fell 3%, headlines asked, "Is it time to sell gold, or double down?" An investment banker friend of mine sent an e-mail with the same question.
It's absurd that a $40 drop in gold is spurring these questions. Will individual gold buyers fret over $40 or even $100 an ounce when the U.S. dollar collapses (as we predict in "The End of America")? Will central banks and sovereign wealth funds, with their trillions of dollars, care about a 3% change in the price of gold when they lose faith in paper money? There's a short list of things to buy when you lose faith in paper money... Along with energy and agriculture, gold is near the top. And as we've pointed out before in the Digest, central banks' gold holdings are historically low.
You can't value gold like a stock, bond, or any other traditional asset. You have to view it as a currency. Except this currency has no counterparty risk. You can't print more of it. And it's only as valuable as paper money is worthless. (We all know paper money is fast approaching its intrinsic value... zero.) And the market is saying the same thing. Take a look at the following five-year chart of the gold ETF (GLD) versus the 20-year Treasury ETF (TLT). People are losing faith in government bonds (i.e. the dollar) and favoring gold, proving what the true currency is...
As Chris Weber points out in today's DailyWealth, gold has risen 10 consecutive years. Going all the way back to 1980, Chris found no other market with the same consistency.
And he agrees gold's rally isn't over. Go to the grocery store and ask people if they own gold... Not gold jewelry, but actual gold bullion. Most do not. Sure, gold is making headlines. But until your waiter, auto mechanic, and tailor are showing off their new Canadian Maple Leafs, you can bet gold will rally. If we do see a short-term dip down to $1,300 or $1,200, we'd treat it as a tremendous buying opportunity.
And it helps that the Federal Reserve is hell-bent on printing the dollar into oblivion. Yesterday, the Fed released minutes from its December 14 meeting... Attendees dismissed rising long-term Treasury rates as a strengthening economy (no inflation here). Officials also committed to the $600 billion Treasury bond purchase program proposed in November. According to the Fed's minutes:
While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program. Some indicated that they had a fairly high threshold for making changes to the program. (Emphasis is our own.)We're not sure what it will take to hit the Fed officials' "high threshold"... Perhaps when interest rates hit double digits, and we're walking to the store with wheelbarr ows of cash. But we're sure the dollar will be far less valuable by the time the Fed quenches its thirst for printing.
In addition to rising interest rates, another "End of America" prediction is also playing out... Soaring food prices. Last November, Porter attended a secret meeting with some of the world's most powerful people (billionaire investors, government officials, corporate CEOs) to discuss the looming food crisis. While most attendees tiptoed around the central issue, Porter dove in. He recalled his contribution to the meeting in the November 2010 issue of Stansberry's Investment Advisory...
Excuse me... I wonder if everyone here is merely trying to be polite... We are here talking about the risks to the global food supply chain because we all know food prices are rising rapidly and these price shocks are merely the beginning.As Porter predicted, the weakening currency caused food prices to rise. According to the United Nations, world food prices hit an all-time record last December (besting the 2008 levels that sparked deadly riots across the world). An index of 55 food commodities followed by the Food and Agriculture Organization rose for the sixth month to 214.7, above the June 2008 high of 213.5. To see how Porter recommends protecting yourself from the global food shortage – and every other "End of America" scenario – click here...
We all know there's a currency war underway – a currency war that began in 2008 with the collapse of Wall Street's investment banks. We all know this will, eventually, lead to a trade war. And we all know that as sure as night follows day, a currency war will lead to a trade war. We know this will have catastrophic consequences for food supplies.
But why hasn't anyone yet pointed to the obvious problem?
It terms of gold, agricultural commodities prices have fallen by about 50% over the last 10 years.
Obviously it's not the price of food that's the problem. It's the collapsing purchasing power of the U.S. dollar that's led us to this situation.
That's what's going to cause a food crisis – and an energy crisis.
The real question we should be discussing isn't food. It's money. And more specifically, the lack of a sound world reserve currency.
New highs: Cenovus Energy (CVE), Fuel Tech (FTEK), ExxonMobil (XOM).
We often get questions on the nuts and bolts of buying gold coins, and one of our favorite sources is Van Simmons at David Hall Rare Coins. We're glad to hear many of our subscribers have worked successfully with him, too... Send your comments to feedback@stansberryresearch. com.
"Late getting into the game, but decided to purchase Morgan Silver Dollars. Contacted David Hall Rare Coins per recommendation of Stansberry team. I spoke directly with Van Simmons who couldn't have been any more helpful. He returned my call to him within the hour and patiently answered all my questions (I'm a first time buyer of coins) with everything I needed to know. As I purchase more coins, I will continue to use David Hall and recommend them to all of your subscribers." – Paid-up subscriber Dan M.
"Just wanted to say how great your research has been in both 2009 and 2010. I am a cpa and in 2008 the market dropped my portfolio from about $450,000 to $250,000. Became an Alliance member in December 2008 and in 2009 added $70,000 to my portfolio, mostly selling puts and calls with Steve. Porter, Dan and Jeff. In 2010 added Frank and Matt to the mix and added another $70,000 and also added 40% to my IRAs. Keep up the good work. Paid $7,500 to be an alliance member and it was the best money I ever spent." – Paid-up subscriber Brian
Goldsmith comment: Thank you both for the kind words. I'm happy S&A has been so beneficial to you.
January 5, 2011
|Stock||Symbol||Buy Date||Total Return||Pub||Editor|
|Paramount Gold & Silver Corp||PZG||4/14/2009||426.07%||Phase I||Sjuggerud|
|Silver Wheaton||SLW||7/6/2009||361.42%||Resource Rpt.||Badiali|
|Silvercorp Metals||SVM||6/1/2009||279.23%||Resource Rpt.||Badiali|
|Northern Dynasty Minerals||NAK||3/2/2009||246.89%||Resource Rpt.||Badiali|
|Rite Aid 8.5%||767754BU7||2/6/2009||177.78%||True Income||Williams|
|MAG Silver||MVG||7/6/2009||168.22%||Resource Rpt.||Badiali|
|Alexander & Baldwin||ALEX||10/11/2002||130.49%||Extreme Value||Ferris|
|Auex Ventures Inc||XAU-T||10/28/2009||128.62%||Phase I||Badiali|
|Top 10 Totals|
|Seabridge Gold||SA||4 years, 73 days||995%||Sjug Conf.||Sjuggerud|
|JDS Uniphase||JDSU||1 year, 266 days||592%||PSIA||Stansberry|
|ATAC Resources||ATC||313 days||542%||Phase 1||Badiali|
|Jinshan Gold Mines||JIN.TO||290 days||339%||Resource Rpt.||Badiali|
|Medis Tech||MDTL||4 years, 110 days||333%||Diligence||Ferris|
|ID Biomedical||IDBE||5 years, 38 days||331%||Diligence||Lashmet|
|Texas Instr.||TXN||270 days||301%||PSIA||Stansberry|
|MS63 Saint-Gaudens||5 years, 242 days||273%||True Wealth||Sjuggerud|
|Cree Inc.||CREE||206 days||271%||PSIA||Stansberry|
|KHD Humboldt Wedag||KHD||6 years, 7 months, 22 days||268%||Extreme Value||Ferris|