The Next Gold Rush

india-gold-etfJeff D. Opdyke: Which of these best defines your thinking during periods when it seems failure is the likely option?

  • If at first you don’t succeed … cut bait and scram.
  • The race doesn’t always go to the swiftest of foot but the surest of step.

Your answer will define how you react to my recommendation that you use today’s low gold prices as a buying opportunity.

Those who see gold as a faded commodity investment with little future have already cut bait … and probably stopped reading at the end of the last paragraph.

Those who see the world as a particularly dicey joint reflexively understand what I’m talking about and are already buying gold. You can stop reading; you’re already on the winning team.

Instead, today’s dispatch is for the fence-sitters weighing whether to own gold in preparation for what’s to come … or whether to disregard the metal as nothing more than fodder for those crazy gold bugs to gnaw on. It’s a confusing world out there. Some say gold is going to $700 (and they might be right, temporarily), and others say gold will shoot to $10,000 (and they might be right, temporarily).

I’m in the middle. And when I tell you why, I hope you see the wisdom of why you should join me there, too.

Before we begin, a small but relevant preamble to explain who else is sitting in the audience today.

Seems lots of Americans are worrying a blue streak, even though we’re told by the media that “all is copacetic” in the land of milk and honey — unless, of course, you’re lactose intolerant and a diabetic.

Through the first half of the year, the metals department for a $24 billion U.S. bank was a net seller of gold, as everyday investors reduced their gold holdings. But since mid-June, sales of allocated gold (physical gold the bank holds in your name) is up 142%. Unallocated gold (physical gold held in a pool rather than in your name) is up 154%.

The U.S. Mint has similar interest. Gold coin sales during the third quarter tripled to more than 322,000 ounces from a year ago. Sitting nearby are some Austrians, Brits and Germans, all rubbing their own worry stones, too, as all three countries report significantly higher sales of local sovereign gold coins. Meanwhile, Australia’s Perth Mint is seeing robust demand, particularly in one-kilo gold bars that are hugely popular imports in China, India and Thailand.

Someone — actually, a lot of someones around the world — has it figured out.

They know the world is not in a good way.

The World Needs a Crisis

Seven years on from the worst financial calamity since the Great Depression and not a helluva lot has really changed for the better. The world’s most important countries are deeper in debt. The world’s most important consumer populations are deeper in debt. The too-big-to-fail banks are bigger, so we know that moral hazard is now bigger since governments can never let those banks fail.

Meanwhile, the world’s politicians — led by the dysfunctional band of mental midgets in D.C. — have done little to improve the lot of the common man or manage well the treasuries those politicians control. And instead of prescribing a financial enema to allow the world economy to purge its collected refuse, global central bankers have been stuffing the world economy with sweets and high-calorie junk food (quantitative easing and other such monetary gerrymanders) in order to induce a sugar high to make us all think life really is better than it was back in 2008.

Of course, it’s not. It’s a good bit riskier than it was back then, which is why physical gold is such a necessary component of any collection of financial assets.

See, a reckoning is coming. It has to. A crisis is the only catharsis to a world addled by excessive debts at every level of society. The pain will surpass 2008.

The problem, however, isn’t leading the horse to water or getting him to drink.

It’s getting the horse to recognize he’s thirsty in the first place.

Gold Is More Than an Investment

Buying gold for its investment merits is like buying a car because it’s a great place to listen to music.

Cars are not useful because they play music, and gold is not useful because it’s an investment. Gold is useful because it’s governmental insurance.

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