Gold Recommendations

Lear Capital: 101 Reasons Not to Own Gold . . .

Friday, July 15, 2011 by David Engstrom

. . . and I don't know any of them!

From time to time I read something written by a person who does not believe gold is money or has value. A couple comments lately struck me as particularly funny. One writer said if gold was so valuable, why would anyone sell it? Why wouldn't they just keep the gold to begin with?

I read it and I thought, "you don't get it, people are keeping it - that's why the price is going up." Why do you think gold has gone from $270 an ounce 10 years ago to $1500 plus an ounce today? People acquired it and don't want to sell it until they can get a meaningful number of dollars for it.

What do I mean by "meaningful?" Meaningful could be that gold is now worth so many dollars that one can cash in gold to pay off a house bought 10 years ago. It just so happens most homes, after a decade of greed-driven lending practices and a housing crash are, once again, worth just what they were 10 years ago. But, since some homeowners were diligent and put extra money in gold over the years, their gold is now worth many times the dollars originally paid. Lord knows when you adjust for inflation, stocks have probably gone down in value and so have bonds. Not gold, though. And now those who sell only sell because they held out long enough to do something meaningful with the dollars they get in return.

Another comment I read stated that the only real money is food and if you want to prepare for some kind of crisis, you should have food, personal hygiene products and essential paper products. Yes, I think it is prudent to have some emergency supplies, in case Yellowstone erupts, but how many band aids and rolls of toilet paper can one get in even a large safety deposit box. And, how much of our savings and retirement should be kept in rolls of Bounty and Dial soap.

This particular writer was also good at math saying that today a $1500 ounce of gold would buy 500 chickens and that if there was a food shortage, those chickens could produce 500 eggs a day. Wouldn't my neighbors in suburbia love that. You just buy them as little chicks and pretty soon they are chickens laying eggs. They don't eat, they don't stink nor do they get eaten by the circling owls, eagles and prowling foxes. You just buy them and then they grow up and lay an egg. Something that writer was good at.

Finally, perhaps the comment I hear most often is that gold is so hard to store and costly to ship. While I don't really recommend it, the cost of postage for a one ounce letter is 44 cents. What weighs more - an ounce of gold or a one ounce letter? And, as far as storage? Well, you can fit about $200,000 worth of gold in a soup can. In fact, did you know one cubic foot of gold weighs about 1200 pounds? At a cool $25 million or so, I think you could find one cubic foot of space to store your gold.

Funny, I always looked at gold as portable wealth. An ounce of gold in your pocket is like carrying around 15 barrels of oil. Try and store that until you retire. The same goes for food. Of course we need to eat and you can't eat gold, but you can't store a lifetime's worth of wheat, apples and corn flakes in your IRA either.

For 5000 years gold has been an effective store of wealth and right now gold demand is such that anyone who does own gold does not want to sell. Central banks are buyers, governments are buyers, as well as the most prominent investors of the world. Why else would the gold price be on the verge of breaking through $1600 an ounce?

Finally, to all of those who know the 101 reasons not to own gold, I have one question. Are they the same reasons you decided not to own gold 10 years ago?

Lear Capital: Where Were the Experts When Gold was $255/oz.

Tuesday, April 26, 2011 by David Engstrom

Gold is in a bubble and Silver has gone parabolic! This is some of the commentary I am seeing and hearing as both metals breach all-time highs. Notice, this occurred over a long holiday weekend when U.S. traders were inactive. It's as though someone was saying, "Now watch! When those stupid Americans see both metals reached record levels, the experts will tell them it's time to sell. Then we can buy more! Hahahahaaaa!

I think back to a time when I sat with the CFO of a very large university at a college football game. I learned who he was and what he did after a brief introductory conversation. When I learned he managed the endowment fund of the university, he explained that they like income-producing property. As I always have, most of my adult life, I casually commented, "you should own some gold." He kind of snickered and said, "What's it at now? $450? Where can it go from here?" I just smiled.

Now, everyone has heard the story about the University of Texas and their purchase of $1 billion in gold. [Note: It was not the University of Texas CFO with whom I sat with at the game.] The point is, most Wall Street experts and other recognized financial experts, have never really recommended gold. And, each time gold has made a significant move above a psychological point of resistance, the naysayers always raise the question, "Is the gold rally over?"

Meanwhile, back at the Capitol, both sides of the aisle are predicting economic Armageddon if they each do not get their way. Every impetus that has driven gold to these levels, and now silver, still exists. Rising debt, soaring deficits, inflation fears, and a weak dollar - just to name the big ones. I will acknowledge one major change. All of these situations have grown increasingly more critical with no relief in sight. Finally, the politicians agree! . . . well sort of!

If you just look at all this with an ounce of logic, it seems there is no reason for gold and silver to reverse course. If the situation is becoming more dire, then why would gold and silver demand and their respective prices drop?

I will agree, nothing goes straight up and there will be those who need and want to take some profit along the way. That's what it's all about. You make a strategy, set targets and stick to the plan. For those who own silver at prices that allow them to take a little profit off the table, good for you. But, if you sell because your resident financial expert says the party is over, just look at that person and ask, "at what point were you recommending gold and silver for my savings and retirement accounts?"

To learn more about adding gold to your savings and retirement accounts visit LearCapital.com.

Lear Capital: Perhaps Most Powerful Reason To Own Gold and Silver

Thursday, April 7, 2011 by David Engstrom

The reasons to own gold and silver today are many and growing. The obvious and perhaps most discussed are skyrocketing debt, a weakening dollar and the rising threat of inflation.

Validating these reasons are rising worldwide demand for both gold and silver. The World Gold Council reports that Gold demand in 2010 reached a 10-year high. Much of the growing demand for both gold and silver is coming from China as their desire to replace the dollar as the world's reserve currency, with the Yuan, is growing more evident.

While gold prices and demand rise steadily, silver has begun to steal a few headlines. Rising 77% in just the last 6 months, growing industrial demand is said to be the main driver. However, history well settles the fact that silver is also a monetary metal. Now, in the case of both Gold and Silver, investor demand could be the real driver of prices to stratospheric levels. Here's why.

Let's first look at gold. Eric Sprott, founder of Sprott Asset Management, LP, recently provided data as to the size of the gold market as it relates to global financial assets. That portion represented by gold is a mere 0.7%. That is 3.5 times what it was in 2002, thus explaining a near corresponding rise in the price of gold.

With even today's largest brokerages recommending gold ownership of 5% to 20% of your portfolio, it's easy to see how gold prices may have a long way to go before you can even breathe the word "bubble." To illustrate, let's isolate on China for a moment. As of December 31, 2010, China had a reported 1054 tonnes of gold in reserve. The U.S. has 8133 tonnes.

If China's goal is to oust the dollar as the world's reserve currency, it likely has to have greater gold reserves than the U.S. To accomplish this, China would have to accumulate an amount of physical gold equal to two total years of global production. Maybe more.

The case for silver to rise faster and further may be even more compelling. Jeff Clark of Casey Research recently provided similar data on the size of the silver market. With silver at $35 an ounce, the physical silver used to back all ETFs totalled only $20.7 billion. That's less than one-third the size of the market cap of just McDonald's. It's one-fifth the size of Pepsi and not even 5% the size of Exxon Mobile.

You can see how a minor shift in sentiment by investors, toward gold and silver, could send the price of each to unimaginable heights.

And if there is no shift? It's because the world paid off all its debt, the budget gets balanced, real estate rebounds and the dollar reclaims all of its losses over the last 10 years. Herein lies what may be today's most powerfu reason to own gold and silver.

For all your breaking gold news and today's best gold prices, visit LearCapital.com.

Lear Capital: Is Your Retirement Doomed Without Gold?

Monday, March 28, 2011 by David Engstrom

According to a recent Newsmax article, "a record number of Americans now say they doubt they'll be able to afford a comfortable retirement." And for those depending on Social Security to assist in retirement survival, current reports indicate, "social security will run at a deficit this year and keep on running in the red until its trust funds are drained by about 2037."

Doubts arise largely from the fear that inflation will slowly eat away the value of current retirement accounts. Inflation is now an all but foregone conclusion. The National Inflation Association has published 12 Warning Signs of U.S. Hyperinflation. Frankly, signs are everywhere and they are just plain scary.

Some statistics suggest inflation is increasing at a 92% clip, every 3 months. Yikes! Just to put things in perspective, 2% inflation rate today could reach double digits in just 7 or 8 months. Translated into terms near and dear to us all, inflation of just 10% means your savings and retirement will have to grow at about 15% a year just to stay even. Why 15%? Don't forget State and Federal income taxes.

Even the experts don't predict those kind of returns from stocks as inflation directly affects disposable income and investable income. The more we must spend on food and energy the less we have to spend, save and invest.

Every day it becomes more critical to invest in things that increase in value at a pace greater than the inflation rate. Right now rising oil prices are a major culprit in the theft of savings and retirement account value. If only you could store a thousand barrels of oil. Housing may also present some opportunity as today's home prices are so low one has to believe there is only one way for those prices to go and that is up.

Housing, however, may be decades away from recovery as some expect another massive wave of foreclosures in 2011. Plus, how many homes can you put away for retirement. There are limits to liquidity in owning multiple homes for investment. Even today, according to a CNNMoney report, 13% of all homes in U.S. are vacant. That's more than 1 of every 8 homes. It's definitely a buyers market but there just aren't enough buyers to fill up all the homes we have. And, that number may still be growing.

So, what's the alternative? Through all of this, gold has been a consistent winner. Rising over 400% over the last decade, gold seems to be one of a very elite group of investments that can outpace inflation. Even today's biggest brokerages and investment banks are driving gold demand by recommending at least a portion of your savings and retirement be put into gold.

Can you retire without a few gold coins in your savings and retirement accounts?

Lear Capital: Silver Races to Close Silver:Gold Ratio

Friday, March 25, 2011 by David Engstrom

The gold to silver ratio is often discussed and used to determine where the price of each should or could be considering the ratio. Historically, the ratio has been set at 15 to one. That is, the value of 15 ounces of silver is equal to the value of one ounce of gold. Currently, we are at about 38:1.

But where did the ratio come from? Who set it? Biblical scholars would point to information in the Bible and combine it with archaeological finds to confirm that God may have been the original authority setting the value of each. More recent history brings us to the U.S. own Original Coinage Act of 1792.

In 1792 our Federal Monetary System was created after numerous failed attempts to introduce paper currencies into commerce. The Coinage Act of 1792, was passed in order that a common monetary system could be created for the new United States.

Prior to doing so, the money was based largely on the British system of pounds, shillings and pence. Use of a variety of other foreign coins, made of both gold and silver, found no favor amongst merchants and citizens alike as it was cumbersome to calculate and convert relative values of each in their daily transactions.

The Act called for the minting of Gold and Silver coins. Taking into consideration the weights of the variety of foreign coins in circulation, Alexander Hamilton, then Secretary of the Treasury, made recommendations of specific weights and metal content for each coin.

In studying the values set for foreign coinage, Hamilton observed that gold carried 15 times more value per the same unit of measure as did silver. So it was in the Act that a gold dollar would contain 24.75 grains of gold and a silver dollar would contain 371.25 grains of silver. In consideration of the fact that a gold dollar would be very small, and that there was really no need for two kinds of dollars to circulate, the gold coin to be minted would be a $10 coin called the "Eagle."

It's interesting to note that Hamilton's calculations of the value of silver to gold came to equal the same ratio as set in Biblical times. 15 ounces of silver equal to 1 ounce of gold.

Today the ratio sits near 38:1. It may surprise some to learn that as recently as September 2008, the ratio was 83:1. With silver demand exploding some expect the ratio to close even further. One analyst puts silver at $52-$56 an ounce by June 2011, closing the ratio only slightly as he also projects gold significantly higher as well. see article

Will silver eventually close the gap? In 1980 as both gold and silver reached what we still refer to as all-time highs, (after adjusting for inflation and debasement of the dollar) the gap closed to its historical level. Silver reached $54 an ounce and Gold hit $850.

Whether it will happen again, only time will tell. But if it does, that's probably a good sign that it's time to sell silver or trade it all for gold.

Lear Capital: Will Fed QE Drive Gold Demand?

Tuesday, October 26, 2010 by David Engstrom

Today, numerous stories are circulating regarding the Fed's upcoming quantitative easing as many try to put a number on the size of the effort. Goldman Sachs puts the number at $2 trillion. Others put it as high as $4 trillion. In either case it is expressed in terms of the Fed "buying" treasuries. Let's think about that for a minute. Who are they buying treasuries from?

I read a great article by Chris Ciovacco of Ciovacco Capital Management that explains the process. Essentially, the Fed goes to its primary dealers, who may be concerned about holding too many bonds, and trades them cash for bonds.

The dealers however, don't want to hold currency for fear of it being debased, so they set out to buy other assets. Gold is likely high on the list of "other" assets because of its inverse relationship to the dollar. The more dollars printed the weaker it becomes and the higher the gold price goes.

Mr. Ciavacco acknowledges that gold is likely on the list of other assets to buy with new-found dollar liquidity. Now the Fed is not only creating dollars out of thin air, it may also be creating gold demand out of thin air. We've been saying it for months now, global gold demand is rising. Central banks are buying more and more and indeed will become net buyers of gold in 2010. That trend began in the latter half of 2009.

Brokerages are recommending gold as well, each publishing their own gold price predictions and recommendations from time to time. And now the Fed is practically forcing gold demand higher by printing even more money.

Do you see the irony? Now we are printing money to buy gold. The more we print the higher gold goes. The more gold we demand the shorter supply becomes and the higher the gold price goes again. It almost makes sense. Maybe we can buy our way out of debt.

Lear Capital: Origin of Gold vs. Silver Ratio

Monday, October 4, 2010 by David Engstrom

Discussed more and more, as silver prices rally, is the ratio in value of silver to gold. Currently sitting at 60 ounces silver being equal to 1 ounce gold, some say that ratio is headed much lower. Why the optimism? Perhaps history explains.

In 1792 our Federal Monetary System was created after numerous failed attempts to introduce paper currencies into commerce. The Original Coinage Act of 1792 was passed in order that a common monetary system could be created for the new United States.

The Act called for the minting of Gold and Silver coins. Taking into consideration the weights of the variety of foreign coins in circulation, Alexander Hamilton, Secretary of the Treasury, made recommendations of specific weights and metal content for each coin.

It's interesting to note that Hamilton's calculations of the value of silver to gold came to equal the same ratio as set in Biblical times. 15 ounces of silver equal to 1 ounce of gold.

Hamilton's ratio, or God's if you will, has now not been seen since 1980 when gold and silver hit respective highs of $850 and $54 per ounce. This is one reason silver investors are excited as they see an ultimate convergence of both the gold price and silver price back to their lawful ratio.

Will it occur? At present, either the gold price has to drop dramatically or silver has to rise even more so. With global debt driving gold demand through the roof, as even central banks are now accumulating gold to offset currency debasement, the more likely scenario appears to be rising silver. Considering gold at $1315 today that means silver would have to be $87.67 an ounce.

Personally, I believe if the silver price does catch up to its historic ratio to gold, it will not be until both reach bubble proportion. Nonetheless, silver has some catching up to do, meaning a well diversified savings and retirement account should maybe have some.

For great on-line gold coin and silver coin prices, visit LearCapital.com and compare. There you will not only find low buy prices but you will find current sell prices as well.

Lear Capital: Silver Gets No Respect

Tuesday, September 14, 2010 by David Engstrom

"When I was born, I was so ugly the doctor slapped my Mother." That's just one Rodney Dangerfield line that will live on as part of Rodney's "I get no respect" legacy. And, right now that's exactly what silver is getting - no respect! - in spite of turning in stellar returns over the last month.

As recently as August 11, the silver price rested below $18 an ounce. Today it touched $20.50 an ounce and appears to be on a mission to draw investor attention. It seems though, you have to do better than a 13.8% one month rise to accomplish that.

So, why is silver moving so strongly now? From an historical perspective, the value of silver to gold was originally set by passage of the coinage act of 1792, the Bland Allison Act. Influenced by recommendations from then Secretary of the Treasury Alexander Hamilton, the value of silver to gold was set at 15 ounces silver equal to 1 ounce gold.

For years that was the standard until Nixon removed us from the gold standard in 1971. The last time gold and silver actually traded near that level was January 21, 1980 when gold hit $850 an ounce and silver hit $54 an ounce. Today the ratio lies near 63:1.

Some investors believe we will again see the day when gold and silver prices converge at this level. That is said to mark the time when both metals peak in value as they did in 1980. Other investors focus more on silver's growing industrial demand, as the development of solar power, for example, could drive silver demand much higher.

Still, others find themselves concerned over recent reports that silver supply is being grossly overstated and that we in fact are in the midst of a silver shortage. So, take your pick. Whatever is driving silver prices higher, it hardly gets a mention.

You would think anything that has risen 25% in just the last year would be heralded as the investment of the year - maybe even the decade. But no, silver just quietly goes about its business of steadily rising in price.

If you are looking for ways to further diversify your savings and retirement accounts, a few American Silver Eagle Coins may be the answer. Consider this. If silver did move toward the historical ratio of 15 ounces per ounce of gold, silver today would have to be $84 an ounce.

If there is indeed a silver shortage, when word finally does get out, silver is set to make a powerful move toward that level. And, if industrial demand really does put an added strain on supply, a potential price explosion is in the making.

So the next time you look at buying a gold coin, you might want to consider an occasional substitute of 50 or 60 silver coins instead.

For breaking gold and silver news visit learcpaital.com for real time prices and low online pricing.

Lear Capital: When the Fed is Bewildered

Tuesday, August 24, 2010 by David Engstrom

Today's news, dominated by more evidence the economy is failing, has caused multiple experts to question the Fed's ability to do anything further to revive the economy. It is being said the Fed is "bewildered."

As the words were uttered, markets took another hit, and precious metals rallied from overnight lows back to levels near multi-week highs. Evidence that housing is still stumbling and jobs are becoming more scarce have dominated the last few days of market news. If the Fed is truly bewildered the question remains, "what next?"

Surely, if this attitude prevails as mid-term elections draw neigh, the chances of any Democrat being re-elected is almost nil. This is exactly what the conservative right has been saying. Your policies have done nothing but kick the can down the road. Only now as we face the problem again, it is under the weight of a crushing budget deficit and trillions more debt.

Still, a host of analysts and experts hold tight to their faith in the markets and curse the likes of gold as a safe haven. Every other day, it seems, the question is raised whether gold has run its course. Yet, gold keeps running steady and true. Some say the bubble is about to break, but how can a bubble be close to bursting amidst such negative sentiment.

At some point even the doubting Thomases have to believe. Then the real rush to safe haven gold begins. Some believe gold demand is at the brink of exploding along with the gold price. Others hold fast to hopes the markets will be revived. Again I reiterate my own personal longing for the days when opportunities in stocks and real estate were abundant but evidence those days are long past is just too overwhelming. Now, the order of the day is survival while the task at hand, for millions, is how to arrive at the time when you get the gold watch. To what asset will you now trust your savings and retirement accounts?

This morning on CNBC, Charles Nenner, founder of Nenner Research, declared the "Dow Faces Bouncy Ride to 5,000." He says we will see this in the next 2 to 2 1/2 years, near peak time when Boomers want to retire. At the same time, "Nenner is also bullish on gold and silver over the longer term and expects the precious metals to start a new leg higher by the end of the year."

Frankly, this is no time to be bewildered. America needs something to happen soon. More stimulus is being contemplated, so are higher taxes and expiring tax cuts. One pumps more free money into the economy, fueling inflation fears. The other sucks money out of the economy and strikes deflation fear in the heart of the Fed. Pick your poison.

Which is the likely course of action? Since debt kills in deflation, the Fed appears willing to do just about anything to prevent it. In deflationary times no one wants to owe money on anything that is losing value. Even less desirable, is lending money. Who wants to lend money against depreciating assets?

If stimulus just kicks the can down the road, causing inflation to run wild, stimulus may not be the best choice but the lesser of two evils. The Fed is already buying more Treasuries as foreign demand appears to be waning. Stimulus may well be the next move.

Is there a better choice? Perhaps we should follow China's lead. In anticipation of a global economic slowdown, China has directed its citizens to own gold. In fact they say take some of every paycheck and buy a little gold. In deflationary times gold becomes like cash and if stimulus needs to be the solution to our economic woes, own gold as an inflation hedge.

Gold appears to be the solution which likely explains why central banks are buying it and so are citizens of China and throughout Europe. Not long ago it was reported citizens of Greece were paying as much as $1700 an ounce to own gold. If as Nenner says, gold is about to enter another up-leg in its bull run, and stocks are about to enter a huge downturn, now may be the best time to own gold.

What bewilders me is why gold is never recommended by our government or by the Fed. I fear a day when the system collapses and foreign countries and citizens own more gold than does America. In my humble opinion, gold is the cure for bewilderment.

For a Free Guide to gold ownership and a series of FREE special economic reports, visit LearCapital.com for a veritable library of free information and services.

CNBC interview: "I don’t know how you can be long stocks...."

Friday, August 20, 2010 by Eric Harding

I would recommend watching this video. On Tuesday the 17^th CNBC interviewed hedge fund manager Kyle Bass, managing partner of Hayman Investments. He gives an excellent lesson on debt. He also gives an excellent lesson on what he is avoiding: “I don’t know how you can be long stocks”. Watch it, then look at your stack of gold coins (or lack of a stack of gold coins!). Then decide. Do you want debt and liabilities in your portfolio, or true assets? Gold coins, numismatic silver and rare gold coins provide a welcome hedge. Call us at Lear Capital today!

Lear Capital's Kevin DeMeritt on How Much Gold is Enough

Thursday, August 5, 2010 by David Engstrom

The owner of ZPR Investment Management is Max Zavanelli, one of the most successful portfolio managers on the planet. He's beaten the markets for many years and is very highly ranked in Barron’s. Just to get into his funds… the minimum investment is $250K.

Max had some very interesting observations about gold that I wanted to share with you…

The first was that he is recommending in his August newsletter that investors hold 25% of their investments in physical gold only!

At Lear Capital we are often asked, "How much gold is enough?" Essentially our message is first to diversify with any amount - just get some gold! And then continue to learn as much as you can about the economy so you can determine your own comfort level as to how you divide your investments amongst various asset classes.

For some people, 5% in physical gold will be sufficient. For others 20%. Here's Max's reasoning for his own recommendation.

He says… and I quote, “The U.S. Stock market has had a high of 60 trillion and a low of 40 trillion in the last 2 years. That exceeds the value of all the gold ever mined by a factor of 9. Gold held for investments is only 16% of the total gold or 26,400 tons in gold bars, bullion and coins. At $1230 per ounce, this is $1 trillion worldwide. This is an insignificant amount relative to stocks, bonds, real estate and currencies. It has enormous potential to become a significant asset class. As people distrust their currencies and their governments, the investment demand for gold will greatly increase. As governments continue to over tax, over spend, and lie about it, there will be an ever increasing demand for gold.

During the past couple of years, gold miners began ending their huge hedging programs. (Selling large amounts of future production in the current market at fixed prices)

Without those forward sales, actual supply will fall significantly. In Feb, the biggest hedger and gold producer Barrick ended its hedging. With the end of Barrick hedging, the true production/demand gap goes up and could reach 55% without demand increasing. This would imply a 25% increase in the average price of gold.

There is a temporary downside of maybe 10% and a 60% upside over the next 5 years. When gold reaches $2000… sell half. Speculative action will carry it further – sell the rest when it does.

Prior to 2009, the favorable demand/supply situation for gold as a commodity was there. Now gold as money is absolutely clear. To protect your wealth, you have no choice but to own substantial amounts of gold.”

For more information on gold, the markets and the economy, visit www.learcapital.com/.

Request a Free Gold Investor Kit and then shop for free services, newsletters and special reports that can help you stay in touch with today's volatile markets.

Kevin DeMeritt
President

Lear Capital Comments on Goldman $1355 Gold Price Prediction

Wednesday, July 21, 2010 by David Engstrom

Gold price at $1355 an ounce within 12 months. That's what I read his morning in a MineWeb article by Lawrence Williams out of London. This gold price prediction is owned by Goldman Sachs, one that is $20 higher than their previous target price.

Although higher, Goldman suggests this price may be the peak as they recommend gold sellers sell forward in order to lock in today's high prices and higher prices to come. But, if Goldman's message to sellers is, it will be smart to sell forward to lock in higher prices, isn't the message to buyers just the opposite? Don't buy forward, wait till the price comes down!

According to reports, Goldman believes prices will temper as the economy starts to recover and the Fed begins to tighten monetary policy. Here's where you lost me.

Today's consensus is that we are in a deflationary trend. The economy is not growing as consumers continue deleveraging. This morning, from Dave Rosenberg's "Breakfast with Dave" we get a quick update on GDP growth. "The economy is clearly slowing — from 5.6% GDP growth in Q4, to 3.7% in Q1, to around 2% in Q2 and it seems like less than 2% this quarter (there is almost no growth at all being built into Q3)."

Even now the Fed is considering additional ways to bolster the economy. One method on the table, again from "Breakfast with Dave," is to cut interest rates on bank reserves which is supposed to induce banks to extend more credit. There is debate on whether or not the consumer even wants to borrow more money. f they do not - plan does not work.

Whether or not this particular stimulus will work or not is really beside the point. The greater point is that right now the Fed sees a need to stimulate, yet Goldman can somehow come to the conclusion the Fed will begin to tighten, apparently, as early as 12 months from now, after gold peaks. Typically, the Fed tightens to hold inflation in check. Historically, gold prices rise with inflation.

Look at the period from 1973 to 1980 when inflation was running rampant and interest rates were rising toward a peak above 20%. Gold prices rose right along with it to a frenzy-induced peak, that if adjusted for today's inflation, would be near $2400 an ounce.

So here we sit. The economy is contracting, the consumer is deleveraging and the gold trend is currently bullish - even according to Goldman. If it is true that the economy will start to recover in 12 months or so, as interest rates begin to rise in an effort to control the inflation rate, aren't those the conditions most favorable to gold?

Historically, inflation and gold have walked hand in hand. There's a reason gold demand today, by central banks, institutions and individual investors alike, is skyrocketing. I submit it's the fear of inflation that drives demand for today. I also submit today's gold demand is relatively tempered as compared to the real demand ahead, as the Fed ultimately recognizes an inflation threat and begins to raise interest rates.

Goldman's direct message to sellers is sell forward at today's high prices or tomorrow's higher prices. The implicit message to buyers may be left to interpretation. But one thing is for sure, the price prediction of $1355 an ounce within 12 months suggests gold prices are climbing 13.3% higher than today's levels within 12 months.

I'm still hard-pressed to find another investment that is projected to do better. How about you?

Lear Capital: How Much Gold in Your Portfolio is Enough?

Monday, June 28, 2010 by David Engstrom

Yes, gold prices are up, the markets are volatile and the outlook for the economy in the face of debts so big, calculators don't have enough digits to figure, is uncertain at best. This all begs the repeat of the million dollar question, "how much gold in your portfolio is enough?"

Some say gold dealers, push people to own too much gold. Sometimes I just blink rapidly and think to myself, "what did you say?" Gold is up more than 350% in the last 10 years and the comment I hear most from people who did not buy is, "I should have listened." And from those who did buy, almost to a person, they say, "I wish I bought more." And perhaps more than ever individuals, central banks even countries are now turning to gold to hedge against uncertainties ahead.

But please note, your decision now to buy gold cannot be based on past performance. I mean really! Any day now someone could pay off our national debt, hire 3 million workers, pay off all past due mortgages and give social security recipients a raise. Yes, the outlook now for recovery is uncertain, at best. That, however is no guarantee that gold will rise from today's levels. You must always decide how you hope for the best and plan for the worst as you manage your own savings and retirement accounts.

That said, what is the right amount to have in your portfolio?

It's been well documented in Lear Capital's weekly news releases and these articles, that brokerages, central banks, governments, right now, are recommending gold. You can find recommendations ranging from 5% of your investments to 20%, it really should vary depending on each person's situation and savings goals.

Not long ago, Anne a faithful reader, asked the very question, "how much gold is enough?" Anne is a gold investor who probably wishes I would have told her to buy more as gold is up 10% in the 3 months since she posed the question. Sorry Anne! My bad! But my answer then is still my answer for anyone who asks today. And before I give you that answer, let me make it clear that I believe everyone should own some gold.

Nobody has a crystal ball and certainly there is no exact formula for dividing your investments over the various classes. Everyone is different, every portfolio is different. Consider this: The family with 25 million of net worth can afford a greater at-risk portion of their portfolio than someone with a $1 million net worth. And the one who has a million of net worth has more risk tolerance than does the one who has $100,000 of net worth.

Many variables go into a strategy. Certainly, no one wants to go "all in" with any investment if it puts your ability to survive at risk. Maslow, put food and shelter at the bottom of the pyramid, the top of our "hierarchy of needs." If you lose that, your choice is slavery or death and those are lousy choices if you ask me.

The secret is to be informed and have knowledge of the current economic environment. And then diversify! That is the key to success. The example given in Gold vs. Stocks illustrated the effectiveness a gold diversification strategy would have had over the last 10 years.

Chances are your friendly gold coins dealer was in the business of promoting diversification 10 years ago and today those who did, are happy they did it. But let's look back 20 years and I submit your gold or precious metals dealer was making the same gold diversification recommendations. During the 90s gold was flat at best, and the stock market surged with the tech revolution. Do you think people who were diversified in gold then were complaining that they owned gold or were they happy because they owned tech stocks?

I'm thinking those who complained about owning gold and put all their money in tech stocks were not so happy when the tech bubble burst. And the cycle starts all over again. In life we need balance. Investing is no different. If stocks crashed again, would you Survive? If Real Estate languishes for 10 years will you still have a place to live? And if gold crashes do you really care as it would likely mean everything else you have is doing fine. Remember! Your gold will never be worth zero - it will always be there waiting to play its historic role as hedge against uncertainty.

A Holmes is on the case – not Sherlock, but Frank!

Wednesday, May 19, 2010 by Eric Harding

Analyst Frank Holmes' writings were picked up by Agora Financial and their 5 Minute Forecast. Here is what he said: “Our experience shows that whenever you have deficit spending, rapid money supply growth and negative real interest rates (inflation rate higher than nominal interest rate), gold will perform exceptionally well in that currency. Right now, we’re seeing massive deficits, negative real interest rates in the U.S. and a worldwide debt problem that is projected to get bigger.

“We have long recommended, based on regressional analyses, that prudent investors consider an allocation to gold -- not to get rich, but as a way to diversify assets and protect wealth.”

Amen to that! Did you catch that? An inflation hedge. A gold inflation hedge. Physical gold. The safe haven. There are many ways to say it! Buy gold!

Cramer's 6 Reasons to Buy Gold Now

Tuesday, May 18, 2010 by David Engstrom

Better late than never I guess. A friend called me last night and said, "turn on Cramer - he's on a gold rant." Normally, I cannot listen to Cramer. He is tiring. And with respect to gold, he always seems to put on his gold cheerleader uniform when gold is making positive headlines to give the illusion that he is actually a gold advocate.

I can tell you with authority that when gold was $400 an ounce he was actually recommending against it. In fact I heard him say once, when asked what he thought about gold, "stay away from it, it's only $250 an ounce." What happened to "buy low?" So, in my opinion, Cramer is now playing catch up. Maybe he is vying for some gold advertising on his show.

Nonetheless, I think he mostly nailed it when, last night, he gave his six reasons to own gold now. I say "mostly", because his reason number one was, "Dependability." He says he believes we will see $2000 gold. He also spoke of rarity saying we just can't find as much of it anymore, but then contradicted himself by recommending some gold mining stocks.

The way I see it, the harder a mine works the sooner they will be out of business. If we were running out of forests, would you rather stock up on lumber now, or buy stock in a logging company?

All in all, though, I think Cramer may have finally come around to a reasonable perspective on gold. With gold demand rising along with uncertainty surrounding sovereign debt of the world, it's very hard to imagine gold doing anything but continuing its gold bull market trend higher. Sure, we will still see some dips in the gold charts, but nothing ever goes straight up. Don't take my word for it though, take Cramer's! Buy Gold Now!

US To Buy Greece for $400 Billion?

Thursday, May 6, 2010 by David Engstrom

One of the Lear gold experts coined the phrase, "I can give you the longitude and the latitude where a hurricane can strike, but I can't make you get out of the way."

For most who understand the potential of debt to destroy an economy, indeed an entire country, what's taking place today in the markets should come as no surprise. For the first time the world is finally facing the possibility that Greece is going to default on its debt.

As I got word of today's market activity I tuned into the markets to see what was going on. I'm not sure how many times I heard it but the point was made more than once that Greece's little debt problem was nothing compared to our own. At one point the Dow was down 1000 points.

I then harkened back to what I heard this morning regarding municipal bonds and the dire condition many of our own municipalities face in trying to keep the lights on. When the question came up as to who gets hurt in the event of failed munis, the answer was "the rich" of course. And then the thought was put out there that this could end up being one way to make the rich play a bigger part in eliminating debt. It was even likened to a tax.

Well I'm here to tell you that it isn't just the rich investing in munis. I don't even want to guess, but I'm thinking there are hundreds of funds with not-so-rich people's money in them that are invested in a basket of munis. And what happens when one municipality defaults? The dominoes fall.

On a global scale, Greece could be the first dominoe to tip over. It's incredibly ironic. Greece's debt is some $400 billion and if my numbers are right each 200 points lost on the DOW represents about $350 billion of lost Market Cap. Now, what do you think all the geniuses in government and on Wall Street would say to this recommendation?

We should print $400 billion and buy Greece. Just make it our 52nd state after Puerto Rico and be done with all this. Europe would be off the hook along with the Euro. It seems the more money we print the stronger the dollar gets anyway. So while the dollar gets stronger we just keep buying all the countries that go into default. Spain #53. Portugal #54. The UK? We can get 4 states out of them.

Then we can inflate the dollar to any level and it doesn't matter. Soon there will be only one currency and then of course precious metals. The one world currency in this scenario would be the dollar and it would inflate so high that $2000 gold would be a distant memory as they would have to re-invent the gold charts to accomodate such big numbers.

Surely I jest, but my point is, today's market volatility should come as absolutely no surprise and this, in my humble opinion, is just a taste of what is ahead. One number I heard was that the world was more than a quadrillion dollars in debt. That's a $1000 Trillion. Now look at the damage just $400 billion is doing to every market in the world.

What would surpise me is if gold demand doesn't triple by tomorrow, as central banks, brokerages, China and everyone with any cash gets in line to buy gold. At this moment the spot gold price is up $30 and silver is just up a dime. Gold is showing that it is the king of inflation hedges. I suspect silver will follow. Greece! Whoda thunk it?

Central Bank Gold Demand Continues to Rise

Tuesday, April 20, 2010 by David Engstrom

I saw a brief report this morning, stating that Russia increased its gold holdings by 15 tonnes in March, more than double what they did the month prior.

Another report suggests Russia could be in line to buy the remaining 191 tonnes of IMF gold. Indeed IMF gold is for sale, however as some would speculate, those who want it most are afraid to pull the trigger and buy it.

It's widely known that China is in the market for more gold, in fact has instructed its citizens to own more gold as a hedge against dollar uncertainty and anticipated hyperinflation. However, if China stepped up to buy the IMF gold, it does not come without risk. It is believed that would be an open sign that China is losing faith in the dollar. Such a move could damage their mass holdings of dollar denominated reserves.

This makes Russia a more likely player for IMF gold as it shares the outlook for inflation and gold. The report of Russian gold buying is yet more evidence to counter touted sentiment that gold demand is now somewhat stifled.

For crying out loud! I even heard reports that suggested Goldman Sachs recent troubles caused gold to go down because of their active role in commodities trading. I'm not even sure I can bridge that gap of logic. Their paper became worthless, gold never has so why try? The fact remains, the financial press makes money when stocks and bonds trade well. See Kevin DeMeritt's report , 5 Ways to Stay Safe and Prosperous During the Coming Economic Collapse wherein he warns about trusting the financial media.

Most are not fans of gold yet gold demand around the world continues to rise. But look at it this way. We're a long way from hearing the shoe shine boy recommend gold. A long long way. Do yourself a favor and own gold today before gold supply for the average person grows increasingly short.

If Social Security Fails, Will Gold Coins Protect Your Retirement Plans?

Tuesday, March 30, 2010 by David Engstrom

As if we needed a bombshell dropped on us today - the New York Times just reported that Social Security is operating in the red 6 years ahead of schedule. That is to say, Social Security is now paying out more in benefits than it is receiving through payroll taxes. According to the article, this was not expected to occur till 2016. However, that number was based on projections of 8.2% unemployment not the 10% number we flirt with every week.

Does this mean Social Security is broke? In the context of this article, not yet! The fund itself is said to be solvent through year 2037, but if they were wrong about the cash flow situation, then they have to be wrong about the projected date of insolvency.

Once again, this is just further proof that we have to take responsibility for the solvency of our own savings and retirement accounts. For many, social security is a last defense if pensions disappear, stocks falter and bonds default. Every day the need to diversify with gold or other precious metals becomes more obvious.

Gold is still a hedge against inflation, it's never been worth zero and it's still a great portfolio diversification tool. Think of it as nuclear protection. As long as you don't need it, life is good. But, in the event of retirement disaster, he who holds the gold has the best chance of survival.

And make no mistake, this is not just a domestic concern. It's a global concern. Take China for example. They have quietly doubled their own gold reserves, started selling dollar denominated reserves back into the marketplace and have instructed all of their citizens to own gold coins. Globally, gold supply and demand trends are already causing periodic shortages of coins like American Gold Eagles. Even the supply of American Eagle Silver Coins are feeling the pinch.

So, if you think Social Security will be your last line of defense against retirement poverty, you might want to rethink your own personal gold recommendations for your savings and retirement accounts.

Gold vs. Dollar vs. Euro - Part II

Friday, March 26, 2010 by David Engstrom

No sooner does the Euro take what some would have you believe, its last breath, than does a deal come to bail out Greece. Along with a contribution from the International Monetary Fund, the European Union seems to have figured out how to restore strength to the Euro that had been getting its tail kicked by the dollar for the last few months.

Yesterday, the Euro dipped to a low below $1.33 and today, so far, we've seen levels above $1.34. Coincidentally, gold today is showing signs of rejuvination, as if anyone believed the dollar's recent strength could be sustained amidst a frenzy of dollar printing.

It just goes to show, the more things change the more they stay the same. In the big picture it is hard to find long term indicators that point to dollar strength, shrinking deficits and lower gold prices. It seems every time gold prices dip on news of - WHATEVER! - someone big comes along and takes advantage of lower gold prices to buy more gold. China and India are among the prime suspects.

So, if I had to make any gold recommendations, mine would be to stay the course, keep your eye on the big picture and a long term outlook. Gold hasn't quit its role as an inflation hedge and as you have heard many times, its never been worth zero.

The earth on tilt - how is this for an article title? "Obama Pays More Than Buffett as U.S. Risks AAA Rating"

Monday, March 22, 2010 by Eric Harding

Folks, please read the following excerpt from Bloomberg. Bloomberg is one of the most trusted news sources with 2,000 on staff in 125 bureaus around the world. They daily provide data to 300 newspapers and magazines. In a nutshell, for the first time in history, companies can borrow money cheaper than the US government can. What does that tell you about the riskiness of our debt? Alot. Here are a couple lines from the article:

“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”

AND:

“While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.”

Here’s a link to the article: http://www.bloomberg.com/apps/news?pid=20670001&sid=azz5FiyZHvMY

Folks, it’s like this and I’m sorry to break it to you, but this is what happens when governments go broke. After they go broke (or when they are in the process of going broke), they inflate and then hyper inflate the currency. My recommendations? Buy gold ! Buy gold ! Buy gold ! Buy gold! Buy gold !