I’m sure it’s no surprise to you that I like gold. But here’s the key…
The Last Currency Standing
Gold has had a rough year. It’s trading around $1,090 an ounce today, about the same price as 2010 – and 43% below its all-time high of $1,900 set in 2011.
For me and you, that is actually a good thing. Because low gold prices give those of us who understand that central banks are destroying the global financial system a chance to buy more before it rises sharply in price.
Gold should no longer be thought of as a commodity in a monetary system driven to ruin by central bankers printing tens of trillions of dollars in a desperate attempt to stave off the insolvency of bankrupt governments whose politicians don’t have the guts to cut spending and adopt pro-growth fiscal policies.
Instead, gold is the anti-paper currency. When central banks are done destroying the value of paper money, gold will be the last currency standing.
The financial world, which basically consists of wits and wags, is holding its breath waiting to see if the Fed will raise interest rates by a measly 25 basis points for the first time in nine years! This is pathetic – but it is also a warning sign that paper currencies are being epically mis-managed by so-called monetary authorities that actually have no idea what they are doing.
Just look around. The United States is considered the strongest economy in the world. Yet we haven’t managed to grow our economy faster than 2% a year since the financial crisis. Moreover, we did that with the Federal Reserve buying $4 trillion of government debt that is now sitting on its bloated balance sheet while it lowered interest rates to zero.
Gold remains the anti-fiat currency in a world where central banks have declared it their mission to destroy the value of paper money. Anyone who believes that has changed, or the reason for owning gold has disappeared, is not paying attention. Investors should continue to own gold and save themselves.
Buy Physical Gold and Select Gold Stocks
Coins and bars: My view is that if you want to invest in gold, invest in gold. I prefer to buy gold coins, which can be done with any number of reputable dealers. I like the one-ounce American Eagles, stored within reach.
Securities: If you want to own it in the form of a security for any reason, I recommend the Central Fund of Canada Ltd. (NYSE:CEF) or the Sprott Physical Gold Trust ETV (NYSEArca:PHYS). Both funds own both gold and silver and give you an opportunity to buy these precious metals at a discount to their spot price. The SPDR Gold Trust ETF (NYSEArca:GLD) is a third way to own gold but tends to attract more speculative fund flows than the other two.
Gold miners continue are best avoided unless you can take a very long-term view. They are a leveraged play on gold on the way up and the way down, and right now gold is going down.
But not forever.
Years from now, gold will be trading at thousands of dollars an ounce, which will be a reflection of the demise of the dollar more than any rise in the inherent value of gold. Gold is a hedge against monetary disorder and policy incompetence, both of which are in huge supply. Save yourself and start buying some.