Just how committed should you be to holding gold (and silver)? Are you holding too much gold as it is…and not enough U.S. dollars?

Or should you be holding anything BUT gold (and silver)? Beyond the cash you need to pay your monthly living expenses, should you hold cash at all? Should every bit of your savings be held in ounces of precious metals? And every bit of your investments be in shares of the companies that drag those precious metals out of the ground?

It might have seemed like an extreme position a few years ago. Heck, it may seem extreme now! But Jeff Berwick is here to explain why it could be the most sensible, most conservative thing in the world to do…

The Fear of Gold

I was on a panel at the recent California Investment Conference in Palm Springs and the question was asked, “What percentage of your portfolio should be in gold bullion?”

The first panelist answered 20%. The second panelist said, up to 30%. Then it came to me.

“I have no problem with someone having 100% of their portfolio in gold,” I stated bluntly. Many in the crowd laughed. Their laughter confused me. What’s so funny about that, I thought?

I went on, “I think it’s weird that people find my answer weird.”

GOLD IS REAL MONEY

After all, we are talking about time tested and true money. The only money that has lasted for thousands of years and is still fully accepted worldwide as a store of wealth. Even Warren Buffet had to recently admit that “Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.”

And that from a man who hates gold the way Whitney Houston fans hate Bobby Brown. So, by stating that I have no problem with someone having 100% of their portfolio in gold I am making an ultra conservative statement. I am stating that I’d have no problem with someone having their entire portfolio in “cash”. In real money.

What would you rather hold “for eternity”? US dollars? A paper debt obligation of a bankrupt nation state?

The fact that so many found that to be a shocking statement says a lot about where we are in this current process of the collapse of the fiat currency system.

THE FEAR OF GOLD

There is such a “fear of gold” amongst most people that it must be due to statist indoctrination and propaganda. It makes no rational sense to have such a fear of such a time tested and true store of wealth.

The same people who fear gold seem to have no problem holding a significant amount of their assets in euros in a European bank as Europe burns around them, both figuratively and literally. The euro might not exist 12 months from now but no one seems too concerned. They act like its been around forever and always will be, but it only was dreamt up by globalists in 1999.

YOUR BROKER FEARS GOLD

Near the end of 2007 a good friend of mine who had been wanting to sell her house called me. I had been telling her for a few months to sell her house and buy gold because a big housing crash was coming.

She said she had received a good offer for her house and checked with me to make sure I was certain about her selling, buying gold with the proceeds, and renting for a few years. I told her, emphatically, yes.

So she sold her house. At the time gold was around $750 per ounce. We fell out of touch for a few years and she contacted me last year around when gold was near $2,000 per ounce. I smiled when she called, waiting for her to tell me about the fortune she made.

“So?” I asked, waiting for the exaltation.

“What?” she also asked, confused.

“How’d that trade work out for you?” I asked.

“Oh. Well I sold the house. And I put the funds into my brokerage account with my (government registered) financial advisor,” she responded.

My heart sank. I knew what she was going to say.

Her financial advisor had talked her out of it. He said putting all her assets into gold was far too risky. Where in the government training manuals does it tell you to even own any gold!

She got worried too and less than a year after selling, under pressure from her old Chinese parents, bought another house. It was a bit cheaper but after transaction and moving costs it was a loss.

GOLD IS IN A BUBBLE

Of course, now, with gold over $1,700, it is nearly impossible to get anyone from the general public to buy gold. It’s gone too high, they cry! CNBC says it was a bubble, they repeat like trained seals.

It’s gone from near $300 to nearly $2,000 in the last decade. Surely that is a bubble and if it hasn’t already popped it soon will, right?

No. That’s not right. This is the problem with watching the value of anything in terms of constantly depreciating US Federal Reserve Notes. In the following chart, when looking at the price of gold in nominal dollar terms it looks like an insane rocket ride of epic proportions. But, when adjusted by the US Government’s own, heavily massaged inflation statistic (the Consumer Price Index, or CPI), the price of gold has just finally reached nearly the same level it was at in 1980 and looks far less spectacular.

PORTFOLIO ALLOCATIONS

Getting back to the initial question posed on the panel as to what percentage we recommend people hold gold bullion as a percentage of their portfolio. While I stated I’d have no problem with 100%, we actually recommend to our subscribers is to hold 30% of their portfolio in bullion – both gold and silver.

We also recommend, at this time holding 20% of your portfolio in gold mining juniors and 15% in gold mining major stocks amongst other things. That’s because we are expecting all the monetary printing going on with abandon in the western world to foment a true bubble, not only in the price of gold but even moreso in the price of the mining shares, especially the juniors. We are expecting a mania for the ages in these stocks. And, how will we know when to sell? When I am asked what percentage of their portfolio should be held in gold bullion and I say 100% and no one laughs.

Best,

Jeff Berwick

The Dollar Vigilante

P.S. The tech bubble is dead. The housing bubble is dead. And the bubble in government debt is in its death throes. What will be the final bubble? It will be in gold and silver mining stocks.
But even if you are wisely invested in these stocks, are you sure that YOU really own “your” share?

It is one of the dirtiest little secrets in the brokerage business. And 99.9% of people have no idea it is even being done to them. It’s called “street name registration” and it’s how the brokerage where you hold your stocks “registers” your shares. To save money and time, and to allow your shares to be included as assets that THEY can use to do what they want with, your brokerage never actually registers you as an owner of the shares.

Street name registration allows your broker to lend your shares to short sellers, thereby driving down the price of your own stocks. Additionally, this method allows your broker to “re-hypothecate” your assets–meaning it allows your broker to borrow money against your shares and speculate in the derivatives market!

These hidden risks are planting the seeds of tomorrow’s ultimate collapse — In which there may be a system-wide collapse of broker dealers, taking down millions of investors, and ensuring permanent non-recoverable losses to an entire generation!

So how can we safely invest in gold and silver mining shares and avoid the collapse brought on by the coming broker dealer crisis?

There are two methods of owning stocks your broker-dealer will never tell you about. These two methods completely remove the broker dealer counter party risk attached to your shares — effectively removing them from “the system.”

These two methods deprive your broker dealer the abilities to sell your stocks short and to “re-hypothecate” them. Your broker dealer will never willingly tell you about these methods – because they make more money when your shares are in their hands – precisely where risks are greatest to you.

These methods are so safe, that even if your broker dealer collapsed tomorrow, and stole every penny from every client investment account you would be able to sleep safe and sound, knowing your stocks are far out of reach, and legally unavailable to access by your broker-dealer.

This means everyone — all brokers in the Unites States and Canada. If every broker collapsed tomorrow due to waves of bankruptcies, these ownership methods will protect you 100%. You will be able to sleep safe and sound at night, knowing your shares are carrying zero counter party risk.

We’ve put together a complete research paper outlining the process to register your shares and giving you all the info you need to know to do it easily, quickly and properly. We’ve spent hundreds of hours dealing with broker dealers, transfer agents, public companies, and the SIPC in researching and finding out all the details on how to get your shares outside of the system.

We’ve put all his research together into a Special Report called “BulletProof Shares”. To find out more… and to get your copy… just click here.

A Parting Shot:

We have a tale of woe similar to Jeff’s story about his home-buying friend…

We told both our mother and our sister to sell their homes back throughout 2005 and 2006.

“Sell your homes. Buy silver…please!” we urged. We might as well have been asking them

Mom ended up taking out a second mortgage on her existing home, while Sis and her boyfriend kept their old home to rent out even as they bought a bigger place.

Neither of those proved to be particular good ideas. Unless the intention was to lose as much money as possible.

The value of those homes is between a quarter and a half lower. Meanwhile silver multiplied in price. Even after tumbling from its 2011 highs, silver is still about five or six times as much in dollar terms than it was seven years ago.

And of course, our loved ones still won’t buy a single solitary ounce of silver. Even after seeing how much ignoring our advice cost them. They still impressively rationalize their staying in the Fed-goosed real estate market…and they somehow sleep well at night while continuing to ignore precious metals.

We are a little offended. It seems that they’d rather listen to the bobbleheads on news than listen to us and to our Austrian school friends about the dangers inherent in saving in the currency of a bankrupt empire.

Today we’d like to leave you with a few words from our friend Mac Slavo of SHTFPlan.com:

“Over the last half decade or so, as the price of gold and silver have steadily risen, financial experts, advisers and pundits have often argued that gold is a bubble. They said it in the spring of 2008, as gold approached $900 per ounce. Likewise, as gold surpassed its nominal 1980′s high and went above $1000, those same analysts were screaming sell recommendations. To this day, with gold nearing $2000, they are still all marching to the same tune.

“Headlines for the last three years have been heavily weighted against gold, with every price spike being met with bubble talk. When George Soros said in January of 2010 that gold was the ultimate bubble, the media pounced on it as evidence that precious metals were through. Of course, Soros had been acquiring millions of dollars worth of gold assets (and continues to do so today). His message was completely misconstrued. Gold, like any other asset that involves a buying frenzy, will eventually become a bubble. And given the reasons for why people buy gold — inflation protection and as a hedge against the loss of confidence in government stability — we can be fairly certain that gold and precious metals in general will eventually reach exorbitant levels and ‘pop.’

“But, as Daniel Ameduri of Future Money Trends points out in the following micro-documentary, we’re nowhere near bubble territory yet.

“It’s important to note that 1980 was the end of the gold run that started when Nixon closed the gold window in 1971. That was roughly a ten year run up in the price from $35 to over $800 per ounce.

“This, however, isn’t 1980. Our debt-to-GDP ratio [Tuesday] morning hit 101% and is going much higher. We’ve added more federal debt in the last 7 months of 2011 than all of the years from 1776 to 1980 combined. The policy of our government is not to curb inflation is it was in 1980, but rather, to stimulate it, as evidenced by 0% fed funds rates (in the 1980′s it was in the teens!) and the massive monetary printing over the last few years.

“1980, even though the end of the recessionary environment was still a couple years away, is when the people felt confident that crisis of the past decade was coming to a close.”

Back in 1980 Fed Chairman Paul Volcker’s actions curbed — and then killed — the rise in gold and silver prices. Today Ben Bernanke’s actions are just adding fuel to the rocket ship that will carry gold and silver prices to undreamed of highs…and the dollar to unspeakable lows.

While the best time to start buying gold would when it was under $300 (and silver back when it was under $6) just a few years ago, that doesn’t mean you shouldn’t be adding to your gold and silver holdings.

It also doesn’t mean that you’ve missed out on getting in at a great time to make gains from gold’s (and silver’s) rise…

The gold price still has much, much further to go. The price of silver may have even further to go! To see how much…and to set yourself up for even bigger gains based on the rise in precious metals… just click here.

Or don’t click. After all, you may believe the mainstream reports about gold being in a bubble. You may believe that the price of gold has nowhere to go but down. You may want to sell your gold and gold-related investments right now. As Mac continues…

“If you feel like our current economic, financial, monetary, and social crises are wrapping up, then by all means sell your gold.

“But we urge you to consider what Future Money Trends has to say about it before you do.

Micro Documentary: Gold 1980 Vs. Today

We hope you watch the video, good patron. And we hope you can agree with us — and with Mac on this one. Again Mac Slavo:

“Despite what the experts in the media and on television tell us, there is no bubble in gold — not yet, at least.

“You see, bubbles require emotionally driven buying (just like bubble pops require emotionally driven panic selling). When all of those family members, neighbors and acquaintances you know who still reject the notion that our economic and social paradigms are shifting; when they start buying gold and silver at rapidly rising premiums and prices (as opposed to their current selling of precious metals to rip off outfits that include ‘We Buy Gold’ shops) and when they all become experts on inflation, safe haven assets, and gold investing, then it’s a bubble.

“Look around. We’re not even close.

“Gold is going up so long as the governments of the world keep printing money and so long as the public’s confidence continue to deteriorate.”

From SHTFPLan

Regards,

Gary Gibson

Managing editor, Whiskey & Gunpowder

ggibsonagora@gmail.com

The Fear of Gold was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Personally, I exited the last of my precious metals equity positions at $975 per ounce and have been on the sidelines ever since (I do still own physical metals). But I believe that we are currently encroaching a good entry point in the precious metals. I’m normally not a big chart guy, but I would like to throw some charts at you and explain why I will be doing some discount shopping for my favorite mining stocks in the not too distant future.

The first chart I would like to discuss is the three-year daily chart:

Please take note of the similar chart patterns in the circled areas. After spectacular rallies, both the May ‘06 rally and the rally at the beginning of this year, gold entered a consolidation period that took the form of a descending triangle. Gold proceeded to break out at $625 per ounce and rallied to a 60 percent-plus gain. The other point about this chart that I would like to point out is the extremely strong underlying support that the 200-day moving average has acted as. In rare instances, such as following the ‘06 peak, gold briefly broke below its 200-day moving average, but it didn’t stay there for long.

The next chart I’m going to look at is the three-year weekly chart:

I like weekly and monthly charts simply because they drown out some of the intraday noise that might show up on a daily chart. You will notice that this chart has some strong similarities to the daily chart. It has the same descending triangle formations following intermediate peaks. Even more so than the 200-day moving average in the daily chart, the 50-week moving average has been pretty much unbreakable during this bull rally.

So where does that put us? Although I think we are getting close to an entry point in this market, I don’t think we are quite there yet. In the daily chart, I would like to see, and fully expect, the 50-day moving average, the 200-day moving average and the spot price to really consolidate tightly. We have entered a trading period where the spot price is trading between the 50- and 200-day moving averages. They will continue to squeeze together until something breaks. This is a signal that a strong move is near.

In the weekly chart, I would like to see the 50-week moving average fully catch up to the spot price. Again, the 50-week moving average has acted as unbreakable support, and I would like to get my money in at or near those levels.

I’ve made my argument for the possible beginning of a new bullish phase in precious metals, so the next question to pose is how high will the next rally take us? This is a difficult question, especially with the ever-changing atmosphere in financial markets. Given that, I believe I can make an educated guess as to how high the next rally will take us. I am going to borrow a chart from my co-author John Polomny, as well as use the charts above, to come up with some specific numbers:

There is a strong correlation between the price of oil and the price of gold. John mentioned that the last time the gold/West Texas Intermediate crude ration dropped to current levels, it rallied sharply to 12. Let’s go ahead and assume we move back to 12, and let’s also use current oil prices of $135 per barrel. That gives us a price for gold around $1,620 per ounce. Let’s say gold rallies amid an oil rally to $150 per barrel. With the gold/WTIC ratio of 12 and $150 oil, we get an approximate price of $1,800 per ounce.

Keeping that in mind, I am going to refer back to the daily chart. The percent rise in the price of gold between the ‘06 breakout of $625 and the peak of $1,025 per ounce was approximately 60 percent. If the next rally moved another 60 percent, we would be looking at gold around $1,600. This is consistent with the figures I derived using the gold/WTIC ratio.

Using all of the above data, I believe that the next interim high will be in the neighborhood of $1,700-1900 per ounce.

There are a couple of things to keep in mind going forward. In a bull market, like the one we’ve had in gold since 2000, each consecutive bullish phase tends to move by a higher percent than the prior one. For example, although the rally to $1,000 gold was approximately a 60 percent rally from the last intermediate high, the next rally could result in a 70 percent move. This is a result of the Johnny-come-latelys entering the market. Each rally simply has more investors than the prior one.

There’s another item worth noting. Although the 2007/2008 gold rally was spectacular, it didn’t sprint out of the gates. You can see that at the end of ‘06 and in the first half of ‘07, gold just didn’t move much. After a brief rally, it kind of puttered around. But looking more closely, you can see that the chart was actually making higher highs and higher lows, building a solid base. We may have a period like that in the following months.

All in all, I think we are close to a really great entry point in precious metals. I would recommend following a couple of your favorite mining stocks and getting comfortable with their price action in order to determine a proper entry level. There’s no reason to hurry, so take your time and make your moves when you’re ready.

Regards,
Nick Jones
The Real Deal
June 26, 2008

Entering the Precious Metals Market was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.