Lear Capital: Gold Preparing For War

2010_01_05_17_53_260001As I perused one of the financial channels today I happened upon a commentary about gold.  The lead-in to the interview was, “Gold is having a rough go of it …”  The anchor went on to say gold is “range bound.”

My immediate thought was, which market are you watching?  If Gold is having a rough go of it what can we say about the markets?  So as not to spout off without facts, I immediately pulled up charts on the Dow, NASDAQ and S&P 500.

Year-to-date the Dow is up .7%, the NASDAQ is up 5.9% and the S&P is up is up 5.5%.  Now let’s see how rough of a time gold is having.  Year-to-date gold is up 7.3%.  Cleary this is a prime example of media bias.  For 14 years this has been the kind of reporting that has kept gold investing a dirty little secret shared by only a small percentage of investors who see through the smoke screen of data released on a daily basis.

Now let’s take a little broader look at the markets as compared to gold.  Over the last 14 years gold has had one down year and is still up more than 350%.  The Dow on the other hand is barely up 41% over the same 14 year period.  The S&P is up 32% and the NASDAQ is up 8%.  Incidentally, since the beginning of year 2000 silver is also up more than 250%.  While gold bugs get blasted on nearly a daily basis for their loyalty to the yellow money, the markets are failing miserably to outperform gold or silver.

Can there be any question that a portion of one’s portfolio diversified into gold or silver over the last 14 years was not a bad thing.  That was then this is now.  We cannot change the past and it is counter-productive to ponder what may have been lost instead of thinking ahead.  For one minute, let’s forget about gold and silver and just look at the markets and what might affect them in the coming months and years.

First, we have a national debt that is 80% higher than it was prior to the 2008 financial crisis.  Make no mistake, this debt is still rising.  If debt crashed the markets once, why can’t it happen again? Secondly, our workforce has only risen by 2 million workers since 2008.  At the same time our population has grown by 14 million.  Food stamp recipients are up 14 million. Social Security payments are up 38%.  Medicare/Medicaid payments are up 38%.  Do you see what’s happening here?  You can’t support all this new debt when the work force has only risen by 1.3%.

To think debt is not a problem in the face of so much overwhelming evidence of another impending financial crisis, is just plain irresponsible.  It’s not ok!  How much money could you borrow if your earning potential rose just 1.3% while your debt increased by 80%?  Are we so desensitized to the truth that facts and hard data no longer have meaning?

Unfortunately, that’s not the worst of it.  We are at war again.  I am not talking about shooting guns and dropping bombs (although we are doing that too).  I am talking about a war that can have far greater consequence.  Well known analyst and intelligence expert, James Rickards says we are at financial war.  It’s Russia and China against the dollar. Russia just kicked Benjamin in the teeth and dumped a record amount of treasuries.  What did they buy with the money? — Gold!  China has been secretly buying gold since 2009.  Some say, if you do the math and add up all the gold that can no longer be accounted for by the West, China has likely quadrupled its gold reserves to more than 4000 tons.

It is possible that today, China and Russia have a combined 5,000 or 6,000 tons of gold.  It’s widely written that China would like a gold backed currency to challenge the dollar’s status as the world’s reserve currency.  If that happens and Russia joins in along with an untold number of anti-dollar partners, the only way to fight back would be to use our own gold reserves to back the dollar.  Steve Forbes says we will have another gold standard.  This could be why.

God help us if the stories of no gold in Ft. Knox are true.  We will be defenseless.  A financial war such as this, is one that would be fought door to door.  Every person for themselves.  If you have gold you may survive as it will be the only affective weapon against massive inflation and retirement account devaluation. Are you ready for battle?  Gold is!

As always, these are just my opinions formed on a base of data that I believe is telling a terrifying tale.  Agree or not I would be happy to have you follow me @DaveTheGoldDr for constant updates.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>