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The Gold Bull Is Still Charging

May 4, 2011 by  

The Gold Bull Is Still Charging

In October 2000 I became the editor of Outstanding Investments. In that first issue I told subscribers to buy gold. For 10 and a half years I have not once wavered in my advice. But I have to confess, after having recommended bullion at $284 per ounce a decade ago I have been tempted to tell readers that it is time to take profits.

Over these past couple of weeks I have contemplated what I would tell you today. And although you are Personal Liberty Digest™ readers and have only read me for two years, gold has in that time nearly doubled.

The question that has been giving me a headache: Is it time to take profits or stand firm with gold?

In considering this I thought back to some of the teachings I learned from my late father, Vernon. He told his subscribers in 1968 to buy bullion when it was $35 per ounce. He stuck with gold all the way through to its eventual high of $850 per ounce. And he watched it slip back to $680 per ounce before telling his clients to sell every ounce they had and instructed them to buy U.S. Treasury bearer notes which at the time were paying 16 percent to 18 percent.

I once asked my dad if he felt bad that he had missed the very top of the gold market. No, not at all he said. He told me how he sat back and watched other advisors sell their subscribers out early; some at a price of $100 per ounce, many more at less than $500 per ounce.

Vern also told me that you can never know the top until it has it has been reached and a decline has begun. He said that J.P. Morgan never looked for the first 20 percent profit or the last 20 percent, but was very happy to take the 60 percent in the middle.

So I list here what I think to be true:

1. We have yet to hit a top. At $1,500 gold may look pricey. But in more than a decade gold has not corrected. Technically, it looks strong.

2. Gold is cheap compared to stocks. In 1980, when gold hit its apex of $850 per ounce, investors could theoretically trade away an ounce of gold for a single share in the Dow Jones Industrial Average. Today it takes eight ounces of gold to buy a single share in the Dow (Dow 12,200 divided by $1,500 per ounce gold).

3. In inflation adjusted terms, gold is still cheap. By real terms I mean when we adjust the purchasing power of the dollar, which shows just how little of a bang for the buck we are getting nowadays. I did an inflation check on the Web (http://www.westegg.com/inflation/). An ounce of gold that may have been in your mattress and was selling for $850 per ounce in 1980 would have to fetch almost $2,500 to buy you the same goods and services that it would have bought you back then.

4. There has been an avalanche of money. Compared to fiat currency there is less gold now than ever. All the gold ever mined in the world fits in less than one tennis court cubed and has a total value of roughly $2 trillion in today’s money. All that gold is roughly worth the freshly printed money that President Barack Obama gave away to big banks, automakers and the quantitative easing program by the Federal Reserve

Miners are adding less than 2 percent to the world’s above-ground gold supply annually, while monetary numbers like M2 or MZM (the super money that the Fed lends to the banks which in turn is lent out in multiples) has been growing at near double-digit rates.

And consider this; all the gold mined this year will be worth less than $200 billion. To give you a measuring stick as to how little this is, the Federal government spends $200 billion every five days!

The numbers get even more jaw-dropping. For example, the U.S. bond market is worth an estimated $25 trillion. With just $200 billion in new gold being produced, if just a fraction of it were converted into bullion, gold prices would skyrocket.

In 2009 the World Gold Council’s Marcus Grubb pointed out that current gold investment allocation stands at less than 0.6 percent of total global wealth (see chart below).

Source: http://www.moneyweek.com/investments/precious-metals-and-gems/gold-investment-has-more-room-for-growth-63944

According to Jeffrey Christian of the CPM consultancy, “Gold [has] been deprecated and reduced as a financial asset. In 1968 gold may have represented 4.5% to 5.0% of the world’s wealth… By the 1990s it was down to 0.2% of the world’s wealth.”

Now Factor In China

The market must also account for China, which has the fastest-growing economy in modern history and is undergoing major changes in the way it handles gold.

Private gold ownership was outlawed by Chairman Mao. But in 2002, the Shanghai Gold Exchange opened and started free trade in gold for the first time in the nation’s history.

In 2004, China legalized gold ownership for its citizens for the first time in 54 years. This newfound right should have a big impact on world gold demand.

Forbes.com, has reported Chinese ownership in gold totals “less than one-tenth of a gram per Chinese citizen,” far below the rate of ownership in India.

It’s estimated that the equivalent of $36 billion in Chinese private investment could move into gold in the coming years. That would be 50 percent of the world’s entire annual gold production at current prices.

On April 21st MSN Money carried this headline: “Why gold could hit $5,000.”

The article points out that analysts at Standard Chartered Bank (SCB) believe gold is in a new “super-cycle” as a number of structural factors—including U.S. monetary growth and consumer demand from Asia along with tepid growth in supply—will push prices vastly higher. Team leader Dan Smith is looking for prices of $2,107 per ounce by 2014.

But the SCB team thinks the ultimate potential is much higher. “Statistical modeling suggests a possible ‘super-bull’ scenario of gold prices rallying up to $4,869 in nominal terms by 2020,” said Smith.

I don’t know where Smith and his analysts come up with these numbers but I, too, think that gold is poised to go even higher.

Action to take: Hold or add to all your physical gold and silver positions. I wouldn’t be surprised by a $200 per ounce or greater correction in late spring or early summer. But if you are not trading in and out of precious metals and are a long-term investor, then hang tight. Five years ago I said gold would hit $2,000 per ounce. At the time bullion was around $600 per ounce, and I think many of my subscribers thought I was nuts. Yet today gold still looks strong and $2,000 per ounce remains my target.

Yours in good times and bad,

John Myers
Myers’ Energy and Gold Report

John Myers

is editor of Myers’ Energy and Gold Report. The son of C.V. Myers, the original publisher of Oilweek Magazine, John has worked with two of the world’s largest investment publishers, Phillips and Agora. He was the original editor for Outstanding Investments and has more than 20 years experience as an investment writer. John is a graduate of the University of Calgary. He has worked for Prudential Securities in Spokane, Wash., as a registered investment advisor. His office location in Calgary, Alberta, is just minutes away from the headquarters of some of the biggest players in today’s energy markets. This gives him personal access to everyone from oil CEOs to roughnecks, where he learns secrets from oil insiders he passes on to his subscribers. Plus, during his years in Spokane he cultivated a network of relationships with mining insiders in Idaho, Oregon and Washington.

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  • Lastmanstanding

    It is far better to have some real money, value in holding precious metals. Those of you who understand fractional banking, the fed and history get it.

    I do not have any faith in the US dollar…commonsense tells one that the more of them there are, the less they are worth…it is that simple…Until they are totally worthless.

    Paper currency, stocks, bonds, t-bills, etc. are and have been an illusion that will come to pass. A reset to precious metals is near.

    You must ask yourself who you trust people with and agenda or God.

    • Pat

      I agree. Why get rid of a long-term appreciating asset? It does not make sense. I, for one, would not sell my PMs for rapidly-depreciating dollars unless
      I was going to immediately invest in something important.

      • Richard Pawley

        Make sure you have all the things you need for normal everyday life.
        If you don’t have a few months of non-perishable food, and all the extra’s that make modern life so much more comfortable than the life that pioneers lived, then even gold will not help much. I have stood in Washington’s Mount Vernon, and observed that it wasn’t to different from what we have today except for modern appliances (but he worked hard and put all his money into his house and farm) and I have stood in the house of Gen. Kit Carson in Taos, New Mexico, which was built many decades later, and it was sparse by today’s standards, almost primitive for someone of his statue. He had so little ‘stuff’. Unless you can get by with very little stuff, then I suggest you consider not just investing but preparing for the hard times that are coming. I first wrote about this in a 16 page copyrighted report in 1990, in my 2006 autobiography, wherein I warned of the coming stock market crash, the danger of derivatives, and advised the purchase of gold, then at 600 or under per ounce. Although I still recommended gold in my last book “The Last Days of the Late Great United States, and the Great Famine that Followed,” I also went more into recommending non-perishable food. Even farmland will be better than gold in the future, if the federal government will let you grow things on it. They are becoming more and more restrictive and in NY the state legislature is even thinking of passing a law that requires all chickens and eggs in the state to be vaccinated. We are fast losing all our freedoms in this country to those who think a new world system of doing things is in order. So for the rich, gold and farmland, but for average people, the things you really need, and learning how to survive and prosper in the really hard times of the Great Depression that is still coming if congress doesn’t stop squandering all the money they can borrow or print, which will result in tremendous inflation – prices tripling. Since “bread and circuses” are demanded by the citizen (one out of seven now on food stamps, at least 10 million more since the present administration took over), it is unlikely that congress will have the courage to cut the spending that could save the dollar and the economy. That being the case those who won’t prepare will suffer the most. All it takes for those who are impoverished is to start buying a little extra each week, an extra can of coffee, or glass jar of spaghetti sauce or five pounds extra of sugar. Since those reading this are well enough off to have a computer there is much you can learn about emergency supplies and how to make do when big inflation hit everyone. To much to tell here, but get ready. I hope we have a few years but all my sources say the beginning of the big inflation has already begun. May God bless all who read this.

    • Peter

      The only trouble with selling gold now is that it will never be as cheap as this again (barring slight fluctuations of course).

  • TIME

    A qucik question, this is to anyone.

    When Gold hits say; $3000.00 per OZ what will the US Dollar be worth?

    Whats this say about political MONKEY games from the World Bank’s?

    Who own’s the World Bank’s? Who really owns the FED?

    WAKE UP PEOPLE……………………………

    • Lastmanstanding

      TIME…I am hoping that precious metals will provide some relief to my kids and grandkids once the dollar is gone and whatever happens with these bastard bankers, fed, etc. IMO, a storm is coming. I believe you and I are on the same page with that one.

      The storm will be just another storm to clean up what happens from time to time as the earth purges itself of “non beneficial things”.

      I understand what is going on. I am planning daily for those around me. God help us all, who help one another.

    • Al Sieber

      TIME and Lastman I’m with you 100%.

  • Bruce D.

    I toy with the idea of selling gold almost every day. A few things have stopped me from doing that. The signs of hyper inflation becoming evident in food prices. The National debt has no end in sight. The fact that very few jobs in the private sector have been created. We can’t very well keep expanding government so people will have jobs. Something has to give and we are already seeing it at the state level. In Europe socialist countries are going under one by one, needing bailouts. Obama’s major plans are to save money with Obamacare and suppress the oil industry to create green jobs that will likely end up in China. Is it any wonder gold is in demand with with policies being put forth that are sure to fail?

    • Richard Pawley

      Food has just barely begun to go up. I believe, and I hope I’m wrong, that both gold and food will go up, but percentage wise food will go up more. Learn about non-perishable food, packaged in nitrogen or with oxygen absorbers that will last 10, 20, and even 30 years.

  • theodorej

    Greetings….. Gold has always been money,I sold 400 gold at 975 and have not looked back and said what if…now when it comes to silver I sold at 19 and wish…to complement a series of bad moves I bought realestate with the proceeds…The wifes jewelry is starting to glisten as never before…jewelry is timeless and difficult to tax and the gold value on a one once 14k braclet is around 800 dollars nearly twice what was paid for it…Iam in no position to give advice but I like jewelry only because it is a hedge in the event of desperation and confiscation of coined bullion by a government that is on the prowl for more money…

    • Bruce D.

      Your post Theodore makes me reflect. I bought gold at 366 and held onto it because of the ever increasing public debt. Still I feel lucky. I tried to get my friends to buy at 566 and as high as 950 but they would have no part in it. I don’t talk about it anymore with them. My story was just the opposite as yours. I sold property at its peak and bought gold at its low. I look at it as mostly luck. The reason why I sold property when I did is because taxes were going way up and people working for the city were getting huge benefit packages and pay in South Florida. On top of that insurance was going through the roof because of hurricanes. I felt that there was no way property would continue to go up as there would be few who could afford it.

    • Dagney

      I have been buying bits and pieces of jewelry whereever I can find it for 3 years now. Ever since I realized BO would be elected. I can’t afford to buy gold coins, though my mother left me 3 one ounce Austrian Coronas that she bought on the advice of her employer in the 1970′s for $175.00 each. I can sure afford to look for jewelry at yard sales, however! It’s fun, too. The thrill of the hunt and all that.

      If, however, a true conservative is elected in 2012, it might be a good time to sell some off because, like when Reagan was elected, gold will drop. The difference, however, is what this article is saying about demand changing with China’s economy rising. May be best to just hold your best pieces and enjoy them and sell off the junk.

      Everytime I think about selling some of my gold, I imagine Zimbabwe and people rolling barrels full of their currency to the store to buy a loaf of bread. Holding gold just as a hedge against collapse seems to be a prudent thing to do, too.

      • Richard Pawley

        Don’t overpay but you can go on line and research emergency foods, or MRE’s (a bit pricy) and other foods that are good for decades and are still cheap compared to what they are going to be. Food storage is another name, and as I wrote recently elsewhere, I’d rather have 10 or 12 cans of coffee than an ounce of silver if I could only afford one or the other.

  • Former Walmart person

    The problem with gold and silver is if there really is a collapse of society that sends these two resources through the roof, it isn’t like you can actually utilize that to live like a King. Maybe I am just stupid, but the idea that after a hyperinflationary collapse, I could just go sell my gold and buy a mansion while hundreds to thousands of angry, rioting, and starving people start roaming the streets when bread is $500 per loaf, just doesn’t seem like an enjoyable environment. Of course, the military could always just show up and declare martial law and send depleted uranium rounds through your living room if you don’t fork over all your gold… LOL, its like choose your poison… angry rioters and anarchy or hardcore tyranny under martial law…. I think the most important resourse you can have is storable food, afterall, the efoods direct guy always says “you can’t eat stocks, paper, and gold”.

    • Bruce D.

      There is only so much food you can buy and store. No matter how bad the crisis it will not be the end of civilization. Many people prosper under any circumstance.

      • Vigilant

        “There is only so much food you can buy and store. No matter how bad the crisis it will not be the end of civilization. Many people prosper under any circumstance.”

        There is, however, little limit to the acreage of agricultural land available and for sale. How do you guage the “prosperous” people in a survivalist environment? Not the ones with the gold, but the ones with the commodities, the firepower, and the will to overcome.

        Lead in the form of bullets will be more valuable than gold.

  • Jeff in OH

    I’m looking at someone or some country cornering the market on silver. There is to big of a difference in the two. A Soros could do it himself and every time it goes way down like it has these few days it starts me to think. It can happen in a matter of a few hours to get it so high no one else would bid thinking it can’t get any higher, but it just keeps ripping on. All through ancient times It’s 30 to 1 silver to gold. So it will get there again or higher

    • Richard Pawley

      The last persons who tried to corner the market on silver was the Hunt Brothers of Texas and when the government changed the rules on buying they lost a billion dollars and TWA airlines. Oh, by the way, last week they changed the rules on margin calls TWICE IN ONE WEEK. That is why silver (which is always speculative and more volatile than gold) dropped so much.

  • Jeff in OH

    I meant 15 to 1 Sorry

  • George J.

    Buy Guns! like i say, if it collapse’s and someone has a product to sell and you have gold and i have a gun, guess who gets the product and your gold. :)

    • Bruce D.

      You will not be the only one who has a gun George. You may be one of the first one to go with that kind of an attitude.

    • Al Sieber

      George, come try and take my gold.

  • Jeff in OH

    Don’t Guns and Gold go together??

    • Al Sieber

      Jeff, absolutely, so do guns and butter.

      • bob wire

        I know of few things guns don’t go well with for mortal man actually.

        • Al Sieber

          bob, got it, what else does it go with?

  • http://web.mac.com/stankerns Stan Kerns

    Maybe–but for gold to go higher someone has to actually buy it, and I just don’t see all that many people awash in cash. THink how much money was required to push the price to where it is, and then ponder the greater amount that would be needed to go on higher, I think that more than a little of the money that has driven gold this far is money with no where else to go because of market fears. My personal yardstick of when to get back into the market will be when gold drops–I believe do to people taking their money out of gold (gold can appreciate–and has, but it can’t “Work”) and putting it into stocks where real growth can happen.

    • Bruce D.

      Good point assuming we have reasonable taxes and legislation. Government may not create private sector jobs but they sure know how to destroy them.

    • Vigilant

      “…putting it into stocks where real growth can happen.”

      The only real growth during a global meltdown is in the form of heirloom seeds as they push through the soil.

    • Richard Pawley

      It may be a few more years, or even a decade (though all my sources say it won’t take a decade) for our whole system to collapse. I hope they are all wrong, but when it eventually collapses so will the whole world system because everyone is copying us and just printing money out of thin air. You can’t eat stocks either, and you have to sell them to someone else to get money to buy what you might really prefer to have. Those under 45 have no idea at all about what hard times are really like unless they are historians. We are not going to have another depression, but a Greater Depression. I said so in my first book in 2006 and have seen nothing to make me change my mind. God willing, we can get congress to stop squandering all the money they can get their hands on and we can slow this all down, but I think we have already reached the tipping point. Many are in denial about this and psychologists have a term for it. It’s called “the Normalcy Bias”. We have never experienced any such thing as food shortages in this country so they just can’t happen. Well, we will all see, won’t we, but only a blind and deaf person could be unaware of how prices of food are skyrocketing all over the world, and even before the Japanese tsunami.

  • Bruce D.

    One more thing. My friend said gold was unafordable at 950, especially in India. Yet gold jewerly has surged in India recently. In Asia where people buy a lot of gold jewelry, gold is looked on as an expression of love. Gold jewelry gives people who drive motorcycles and live in poor housing a sense of security and status. But gold will peak at some point. No doubt about that.

  • OneDamnAngryAmerican

    For the feeble-minded. Buy 10K worth of gold. When it is worth 20K, sell 10K. That is/was your initial investment. Do what you want with the left-over. IT’S ALL PROFIT! Duh?

  • http://WWW.supersonocaero.skyblink.org STEPHEN CLINTON

    hi PRESIDENT UNITED STATES ENERGY WORLD…
    GOOD evening general of the G-20, well come to the the white house distinguished white ladies ,gentlemen of honour, white house press men and the jury of honour of the the day , i will like to congratulate mr president on todays victory of the GREAT AMERICAN MILITARY OCCUPATION in the mideast and africacom..the death of osama bin laden who is gone and gone to hell for ever……we adore you work sir….we say thanks to brigadier marshall .B of the white house who made this possible to all the american people that after 10years of the demolition of the world trade centre …sept 9/11.will win her coursee…thanks to the american navy and the myers gold link….
    long live AMERICA
    GOD BLESS AMERICA…
    FROM MAJOR steve..

    • Bruce D.

      Say what???????

  • http://com i41

    Go a head and buy gold, I’ll take real estate that can produce something, not a peice of commerical real estate that need something built on it or depends on someone else. I’m talking real estate that can grow what ever, trees, corn, wheat, hay, or livestock, and make damn sure you getthe minerial rights even if nothing is supposed to be under the ground. When things go to hell, you may be able to barter for some goods, but the gold will eventully run out. Something bankers and the book trained bastards can not understand, because it doesn’t fit in their elit trained schooled mental pictures. Onumnutts is a prime example of a book trained dumb bastard.

  • FreedomFighter

    Some silver wont hurt you either and always have some lead…just in case you need to give bad guys lead poisoning.

    Laus Deo
    Semper Fi

  • http://com i41

    Freedom Fighter, I have always saved wheel balancing weights to cast for slugs, as well as keep plenty of powder and reloading supplies. Now I am looking at milling equipment to make “things” out of metal. This is something is not taught in schools about building anything useful. All of my children including all 5 daughters know how to weld and asemble equipment, and now all of my grandchildren are learning the same skills plus they will learning milling machining as they get older. One job that grandparents are pretty lax on teaching their grandchildren. I learned blacksmithng from my granddads who were ranchers and farmers and taught the ability to be self sufficent and depend on no one.

  • jopa

    Well I just looked at the sites chart and gold just dropped $22.80 so I guess things are really looking up again.Thank you Mr. President.

    • libertytrain

      It dropped quite a bit a couple weeks ago and then rebounded and today is going down and up and down and up again, etc. Kind of what it’s been doing. I watch it everyday.

  • minky

    should we be selling or buying silver now that it plunged today. what say you?

    • chow

      Added some silver today. I figured to hold on to my precious metal and give it to my children someday if nothing bad happens. I’m sure value of precious metal will keep going up as population increases and more money and debt expands.

      • Richard Pawley

        Just remember the wise advise about investing that is given in the Bible, to divide your investing into several parts (it says this in better language than I am writing here) because no one knows exactly what the future holds. Of course, back then all investments were real, no stocks or bonds, or coupon money.

  • bob wire

    I was noticing the slip yesterday and wondered how you might respond Bob Livingston.

    It’s all by me ~ not in my league of play.

    Worked with a man that did some treasure diving off the Florida coast some years ago ~ When you are fortunate enough to find it, you left to fight the FED for it.

    • http://www.boblivingstonletter.com/ Bob Livingston

      Dear bob wire,

      Corrections are not unexpected.

      Best wishes,
      Bob

  • jopa

    Now gold is down $47.20 in the last 24 hours.

    • libertytrain

      And oil is below $100 – frequently as oil goes, gold goes. For the moment.

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