Time to Bail On Gold & Silver? Not So Fast...

Friday and Monday were one of the worst trading days for gold and silver in many years. You've probably heard and read from mainstream financial media that gold's best days are behind it. I don't quite agree with that notion, even though major technical damage has been done.

As I've said before, I don't claim to be a great short-term trader. However... I've called long-term trends months (and even years) before they came to pass. In early 2008 I bought put options on Fannie Mae and Freddie Mac, because I didn't see any financial statements for the past three quarters. My options expired worthless in February and April, but my long-term hunch was proven correct when both entities went into federal receivership (bankruptcy) in September 2008.

I also wrote a Guest Commentary for PrudentBear.com in 2004 calling the residential real estate bust 3-4 years early. I'm not saying this to brag or pat myself on the back - only as proof that I know what I'm talking about.

Why do I believe that gold and silver still have a bright future? The fundamentals that carried both metals higher the past 12 years are still in play - and have deteriorated further in that time frame. The Eurozone is proven to be an economic disaster with several member nations effectively bankrupt. The United States government is also bankrupt, but the Federal Reserve has kicked the printing presses into overdrive to try to keep the economic party going.

Throughout history, all government-sponsored fiat currencies have failed - while gold has remained a store of value for thousands of years. All currencies around the world are the fiat variety, and China has accumulated several thousand TONS of the "barbarous relic" (while selling out of its dollar holdings) to make the Yuan at least partially gold-backed - and have it be the world's future reserve currency in the future.

The Chinese (and most Asians) are long-term thinkers, and they want to make sure the Yuan remains the world's new reserve currency for as long as possible. Shanghai and Dubai have gold exchanges, and China encourages their citizens to buy as much gold as possible. Russia has also bought thousands of tons of gold for its reserves.

I don't know how long it'll take gold and silver to reach their 2011 highs, and frankly I don't care. They're tangible assets that will always have some value in both inflationary and deflationary times. They're an insurance policy against government and central bank stupidity. I trust the metals more than I trust bankers, bureaucrats or Wall Street stock jockeys pimping annuities, stocks or mutual funds.

IRA Confiscation Could Never Happen Here... Right?

If you would have asked me a few years ago if the federal government would put limits on – or outright steal – 401(k) and IRA accounts from Americans, I would have told you to get your meds and your tinfoil hat adjusted. However, given the times we live in, the people we have in government, and knowing that it's happened in other countries before... it's not that far-fetched a notion. Just look at the recent outright theft of bank deposits by the IMF and EU in Cyprus.

Argentina's government “borrowed” citizens' pensions in 2001 AND 2008; Bulgaria, France and Hungary did in 2010, and Ireland followed suit in 2011. It's obvious the federal government has absolutely NO intention to cut spending or balance budgets until their backs are against the political wall. Elected officials are addicted to substitute good speeches and minor reductions in spending increases for sound fiscal policy – not actual Honest-to-Pete cuts, where spending in Year 2 is less than Year 1. Every time they have a chance to cut spending, they just “kick the can” down the financial road, and always avoid any short-term economic (or political) pain.

The obvious next step for greedy politicians is to look for large amounts of cash that can solve the problem in the short-term. As of September 2012, Americans had an estimated $19.4 trillion in private retirement accounts. That amount would definitely cover most or all of our national debt – depending on if/when the government took this action.

If the federal government decided to “borrow” your retirement funds, the money will probably be rolled into Treasury bonds paying a paltry amount of interest per year. You'll get a small interest payment every month, but I have serious doubts you'll ever regain control of your money. Anything with government is like the financial version of the Hotel California: You can check out anytime you like, but you can never leave.

In case you think “Something that could and would never happen in America,” sorry to burst your bubble - but it already has. FDR stole people's purchasing power by devaluing the dollar in 1933. President Nixon closed the gold window in 1971 and Henry Kissinger created the Petro-Dollar standard in 1973, which further fueled inflation by allowing the US to borrow, print and spend even more funny money. And I don't think the Obama Administration has any problem confiscating Americans' retirement funds.

For more proof, just click here, here, and especially here – Jim Sinclair gives a strong warning to exit the system and avoid the Financial Nazis.