Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20
QE4EVER! - 9th Sep 20
AMD Ryzen Zen 3 4800x 10 Core 5ghz CPU, Cinebench Benchmark Scores (Est.) - 9th Sep 20
Stock Traders’ Dreams Come True – Big Technical Price Swings Pending on SP500 - 9th Sep 20
Should You Be Concerned About The Stock Market Big Downside Rotation? - 9th Sep 20
Options Traders Keep "Opting" for Even Higher Stock Market Prices - 8th Sep 20
Gold Stocks in Correction Mode - 8th Sep 20
The law of long-term time preference and Gold ownership - 8th Sep 20
Gold Bull Markets: History and Prospects Ahead - 8th Sep 20
Sheffield City Centre Coronavirus Shopping Opera Ahead of Second Covid-19 Peak - 8th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The 12 Gold Bugs of Christmas

Commodities / Gold and Silver 2010 Dec 08, 2010 - 02:18 AM GMT

By: Jeff_Clark

Commodities

Best Financial Markets Analysis ArticleWarren Buffett recently remarked that you can't value gold like an oil company or farmland, so we should forget gold and buy equities. But he misses the point! Gold doesn't produce value because it is value; in other words, gold is money.

It's sad to see Mr. Buffett go to the dark side. But, as I'm about to show, he's losing company when it comes to his views on gold.


It's difficult to fathom why a professional money manager - someone who looks at markets all day long and tries to make money for his clients - doesn't see the in-your-face arguments for buying precious metals. It's borderline irresponsible. You may think that's a strong statement, but I ask: what would you do if you were responsible for investing other people's money and found yourself in the following investment environment:

  • The US government had printed more money in the past two years than at any other time in world history. Then, they printed more.
  • Government spending exceeded revenues by obscene margins, and, in the most recent year, the US ran a budget deficit of $1.4 trillion.
  • Interest rates were at 40-year lows.
  • Runaway entitlements and social discord remained unresolved in many major European countries.
  • Raising taxes and cutting spending to reduce the debt burden were politically untenable, leaving inflation the easy and likely solution.
  • The economy was weak and showed signs of weakening further.
  • Financial markets were tenuous, and the stock market as a whole was vulnerable.
  • Gold, in spite of being the #1 performing asset of the past decade, was roughly $1,000 below its 1980 inflation-adjusted high. Silver was even further undervalued.

What asset would be a wise and time-tested holding for this kind of environment? Think about it: gold is designed exactly for these kinds of circumstances. Any casual glance at history will bear this out. So, yes, "irresponsible" comes to mind when you're handling other people's money and ignoring the very asset that is ideal for the current economic and monetary climate.

There are others, however, who "get it." And they make my list of the Twelve Gold Bugs of 2010:

1) Peter Thiel, Clarium Capital Management. At the end of the second quarter, Clarium had no gold holdings. But that changed in Q3: the firm put $11.4 million into GLD, buying about 100,000 shares.

2) Julian Robertson, Tiger Management. With no prior gold exposure, the chairman of Tiger invested a whopping $247 million in GLD in Q3, buying about 2 million shares.

3) Chris Shumway, Shumway Capital. His first-ever gold purchase occurred in Q3 when he put over a quarter-billion dollars into GLD - more than 2.1 million shares.

4) Dan Loeb, Third Point. The firm made its first gold purchase last quarter, putting $15 million into GLD, about 115,000 shares.

5) Steve Cohen, SAC Capital. Already invested in GLD and four gold mining companies, the firm placed over $9 million in four new gold stocks last quarter.

6) Highbridge Capital Management. With seven gold companies already in the fund, Highbridge recently put $11.4 million into two more gold stocks.

7) Howard Marks, Oaktree Capital. The firm increased their investment in two gold companies by an additional $6 million.

8) John Paulson, Paulson & Co. If you don't know the name, Paulson made a fortune betting against the housing market and financial companies in 2008. Now, his single largest holding is gold. His fund also has large positions in seven gold mining companies. Mr. Paulson believes in gold so much that he started his own gold fund earlier this year, investing a quarter-billion dollars of his own money.

9) Russia. The Central Bank of the Russian Federation has been steadily buying gold since Fall 2007. They added 600,000 ounces of gold to their official reserves this October, with year-to-date purchases now totaling 4.6 million ounces. Russian's gold reserves now stand at 24.9 million ounces - breaking into the top ten globally.

10) China. The Chinese government doesn't publicly disclose what they're doing with their reserves, so how can I put them on the list? Because their announcement last year revealed they had been buying gold all along and had increased their gold reserves by 75%; because it's widely believed the country is currently buying all of its own gold production; because government officials have publicly encouraged their citizens to buy gold and silver; because the country has disposable income growth of 15%, but gold demand growth of 26%; because China's commerce minister recently stated, "Doubtlessly, if the yuan is set to become an international currency like the dollar or euro, China has to get a huge gold reserve to support it, and a reserve of 1,054 tonnes is far from being enough." I could go on, but it's clear that the Giant from the East is extremely bullish on the yellow metal. 

11) Doug Casey, Casey Research. A longtime gold bug, Doug insists a mania still lies ahead since the common man has not jumped on board. As you may know, my boss is heavily invested in small mining exploration companies and said earlier this year that he expects to see a life-changing rally in them. It's perfectly normal for the juniors to cyclically run up 1,000%, he says, with the leaders increasing 10,000%.

12) Peter Schiff, Euro Pacific Capital. Peter believes in gold so much that earlier this year, he started his own bullion dealership. We always caution our readers to watch out for the dealer that starts pushing numismatic coins, but what I like about Peter's Euro Pacific Precious Metals is that they only sell bullion, and only at reasonable prices. In addition to miners and ETFs, I believe investors should allocate at least one-tenth of their net worth into physical gold (and silver), and Peter has created a reliable way for average investors to do so. Also, starting a bullion dealership when gold is already selling for four figures means Peter thinks the gold bull market has a long way to go.

None of the individuals on this list think the gold price is too high. They're buying for the future, to both protect and grow assets. They don't believe economies are as stable as reported, and they recognize the implications of a world floating on fiat currencies. They also believe governments' attempts to "fix" the problems will not only fail, but make fiscal conditions worse.

As for me, I think quantitative easing will "work" - I think the Fed will meet their goal of inflation, but that it will spiral out of control for the reasons I outlined above. They are neither omniscient nor omnipotent, as they try to claim, and this situation will quickly snowball.

Printing money, as the Fed is relentlessly doing, is not just supportive for gold, it makes owning the metal a requirement for the foreseeable future. This reckless pursuit of dollar abuse will have disastrous consequences. It will destroy the US dollar, weaken the US economy, and cripple the US government's influence in the world. Gold is your #1 protection against those inevitabilities. 

I hope that this Christmas, you'll become a gold bug, too.

This article was written by Jeff Clark of Casey Research exclusively for Peter Schiff's Gold Report. To be the first to read the latest precious metals market analysis from Peter Schiff, the Aden Sisters, and Casey Research, CLICK HERE for a free subscription to Peter Schiff's Gold Report.

 


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules