Gold Q and A From Readers

By: GE Christenson | Tue, Apr 8, 2014
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Based on questions, opinions and rants from several websites, these are some typical questions and my answers.

Q: "Gold has been going down since August of 2011. It is clearly in a bear market, so why tell me it will go up?"

A: Yes, gold has fallen about 40% from its high but why assume that means it will continue falling? It looks to me like a 40% correction in a long term bull market.

Q: "If gold were in a bull market, it would be going up but gold is clearly going down, so why do you think gold is in a bull market?"

A: I probably can't convince you, but these are the facts as I see them.

  1. Gold was selling for about $42 in 1971 when the national debt was about $398 Billion, not the $17.5 Trillion ($17,500 Billion) it is now. Gasoline was selling for about $0.36 per gallon and most prices for food, energy, housing, and automobiles were similarly inexpensive compared to today. That looks like a long term bull market in quantity of debt, and a bull market in the prices for food, energy, and gold. It looks like a bear market in the value of the dollar and most other paper currencies. Be happy you don't have your life savings in Argentinian Pesos.

  2. All markets correct. The NASDAQ 100 dropped from about 1,480 in July of 1998 to about 1,060 in three months. However, by early 2000 it had surged to over 4,800. Crude oil prices, T-Bonds, the S&P, and most markets rally, fall, and rally again. Gold will rally and then correct again, and again.

  3. Gold in 1980 was in a bubble as was the NASDAQ in 2000. The charts, ratios, and timing for gold currently look like a correction, not the aftermath of a bubble.

  4. The Federal Reserve and most central banks are monetizing debt, or as it is often called, "printing money." Do you think they are doing this because our economies, which are drowning in debt, are healthy? Do you think this won't result in some nasty inflation? When people realize that central banks and governments are NOT supporting their currencies, they will buy even more gold and hard assets as they see their savings being trashed by the "printing" and the inevitable inflation.

  5. Do you think printing many $Trillions to support failing banks and bad derivatives is a signal that "all is well," or a sign of desperation? Central banker desperation supports gold prices.

Q: "I bought gold near the high in 2011 and I'm tired of waiting for it to go up! I should have bought the S&P instead and I'd be far better off."

A: As of today, you are correct. Timing is important! Buying near the top in any market usually means losses or long waits. But the relevant question is not what you should have done back then, but what will you do now? Wait, throw in the towel, buy high and sell low, or what? Financial TV will encourage you to buy stocks, as they always do. Maybe you should, but I encourage you to give our bankers and governments time to create another crisis which will almost certainly increase the price of gold more than the S&P.

Q: "Why are you always harping on gold? I shorted the NASDAQ in early 2000, covered a few points off the bottom, sold my house at the peak in 2006, and bought stocks in early 2009. I'm probably far better off than you broken-record gold bugs. Get a life and find a new topic to rant about."

A: Good for you! Very few people were that successful and timed the markets that well. Regardless, gold is undervalued now, unlike in August of 2011, and is a good buy in my opinion. Maybe you can do better in selected bio-tech stocks, but gold has no counter-party risk, a long history as real money, and is insurance against failing monetary systems and political uncertainty. Will bio-tech stocks protect you from banker fraud, bail-ins, currency devaluations and inflation?

Q: "I see nothing but trouble in the financial and political world. I see potential war in the Middle-East, in the Ukraine, in the South China Sea, and maybe elsewhere. I see morons in high places doing silly things. I see bankers printing their currencies to excess, as in uncharted territory excess, and I can't see how this will end well for anyone, even the upper 1% of the political and financial elite. I want to buy gold and hunker down but I also know that gold prices are manipulated, controlled, and capped, so why should I buy gold?"

A: I think it is important to remember that the powers-that-be (PTB) have been mismanaging the world for a long time, we are still here, the sun still shines, and gold has retained its value for several millennia. If the manipulation were overwhelmingly powerful, why is gold selling for about $1,300 instead of $300 like it was 12 years ago? The answer is, in my opinion, that the PTB know the dollar is going down and gold is going up, probably a long way up, but the PTB want to manage the dollar's devaluation, not let the devaluation get out of hand, and they need to keep the game of financial musical chairs playing while they "get theirs." Buy gold and ignore the daily, weekly, and monthly shenanigans in the markets.

Q: "I think silver is a better value than gold. I think gold is going up and silver is going up even more. I'm selling my gold and buying silver. What do you think of that plan?"

A: I think, as of today, silver will appreciate much more than gold and so you are probably correct. But things change and I like the safety and security of gold also. Balance is good.

Q: "I think aliens are to blame for all the ills in the world today. What do you think?"

A: I think not.

Q: You doom and gloom types have been wrong for years. The S&P is at an all-time high, gold is off 40%, silver is down nearly 60%, and the Fed will support the stock market with a Greenspan/Bernanke/Yellen "put." Why are you still talking about gold and silver when stocks are clearly the place to be?"

A: You might be correct, but what I see is a QE supported stock market that is over-bought on a daily, weekly and monthly basis and ripe for a correction. Maybe it will and maybe it won't. I also see gold off nearly 40% and silver off nearly 60% from their highs and ready to rally. I see irresponsible political, economic, and monetary policies creating more debt, "printing money," increasing deficits and "kicking the can" into a very dicey future that might include a derivative crash, depression or world war. Do you trust world leaders to play nice and do what is good for their people, or to do what is good for the upper 0.1% that run the show? Righto! That's why the stock market might go up a little more but gold and silver will double or triple in several years.

Q: "China is buying all the gold they can find and the western central banks and governments are selling. Is this wise for the western world?"

A: It is certainly wise for China. In my opinion it might be sensible in the short term if you are a western central banker or a European or American government leader afraid of a currency crash. It is certainly not a good idea for the western world in the long term. Selling western gold seems like eating our seed corn. We might not starve today, but our future will become increasingly bleak. Good luck to the western world! We will need it and more.

Q: "I'm putting my trust in God and my money in 3 month Treasuries. I think you should also. Go ahead, admit it, you are a bit jealous."

A: I'll pass on the Treasuries. I'm not jealous. I put my faith and trust in God and Gold. It works for many people.

As George Bernard Shaw said:

"You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the government. And, with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."

 


For more academic and enlightening analysis, you might find value in:

Nick Giambruno "Timing the Collapse"
Alasdair Macleod: "Renewed estimates of Chinese gold demand"
Bill Bonner: "Civilization Will Not Survive"

 


 

GE Christenson

Author: GE Christenson

GE Christenson aka Deviant Investor
www.deviantinvestor.com

GE Christenson

I am a retired accountant and business manager who has 30 years of experience studying markets, investing, and trading futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me about timing markets, risk management, government created inflation, and market crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs using both fundamental and technical analysis. I offer opinions and commentary, but not investment advice.

Years ago I did graduate work in physics (all but dissertation) so I strongly believe in analysis, objective facts, and rational decisions based on hard data. I currently live in Texas with my wife. Previously, I spent 20 years in Barrow, Alaska, the northernmost community in the United States, 330 miles north of the Arctic Circle.

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