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.
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.
Labels: Ben Bernanke, central banks, china, dubai, Federal Reserve, gold, quantitative easing, russia, shanghai, silver
posted by Brian Ochsner | 9:49 PM
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