HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
I am writing about the precious metals for two reasons. The first question new subscribers ask is how to invest in the precious metals, and especially how to invest in physical gold. Secondly, gold has been very strong over the last several weeks, and if (when) it breaks above the old high of $1,220 per ounce you should have your positions in place because it will be like the blastoff of a rocket.
I have been bullish on the precious metals, since late 2003 when gold was $380/ounce. The current bull market began in 1999, when gold hit its low of $255 per ounce, coincident with Chancellor of the Exchequer (now Prime Minister) Gordon Brown selling one-half of the UK’s gold stores. At that time, inflation adjusted, commodities were at their lowest since the Great Depression. The current stock bear market began in early 2000. Because bull markets in commodities and financial assets alternate in periods lasting 15-18 years, history suggests that the bull market in the precious metals, and the bear market in financial assets, will last for another 5 to 10 years.
Throughout the history of humanity there have been three sources of wealth. Land is wealth, and I again suggest you own your home free and clear, and when you can afford it, buy recreational/farm land. Human capital is the ability of a person to work and create a good or service (wealth). Gold has always been wealth, and despite being described dismissively as a “barbarous relic”, will always be wealth.
You must understand that gold is not an investment, it does not produce a return (dividend). You should also appreciate that the value of gold is not going up; the value of paper (fiat) money is going down. Consider gold to be a storehouse of wealth. In Biblical times, in the Great Depression, in 2010, an ounce of gold bought 300 loaves of bread. In Roman times, an ounce of gold could buy a fine toga, today an ounce of gold can buy a fine suit.
The fundamental factors driving the bull market in the precious metals should be obvious: governments are debasing their paper currencies; none can be considered safe. No paper currency, including our dollar, is “as good as gold”. The deficit this year is $1.6T. Forty-two percent of this year’s budget is borrowed money. Obscene and insane are strong, pejorative words, but can be applied to our current financial situation.
The precious metals have been acting very well over the last few weeks. Wednesday was especially interesting; the DJIA was down 72 points while gold was up $17. In a precious metals bull market, the miners (because they are leveraged) lead bullion and silver leads gold. Look first at the Silver Wheaton (SLW), the best performing silver miner.
SLW touched its old high last Wednesday then backed off, and closed at the old high on Friday (stocks often pause at old highs to “probe overhead resistance” before breaking out). SLW breaking to a new high, especially on large volume, could be the first signal that the miners and then bullion, could break out.
Among the gold stocks, Royal Gold (RGLD, see chart next page) has been performing well.
I will finish this discussion in an Interim Bulletin later this week. I will make recommendations on how much of your portfolio to devote to the precious metals, how to invest in the precious metals in your brokerage account, and especially, how you can purchase specie, coined gold and silver.
RMD
I have provided many examples over the last several years of when things get tough, people save the gold. Gold has always been and will always be money. In May, 1940 (just after Hitler invaded France and the Low Countries), the Vatican transferred to the United States a quantity of gold bars valued at $7,665,000, a portion of them sold immediately to raise cash.
This is from a subscriber in response to mentioning palindromes.
“One of my favorite musicians is Weird Al Yancovik. He writes a song called “Bob” that is entirely palindromes…Mt favorite is “a Toyota’s a Toyota”.
N.A., CA
In the last letter I mentioned I was having problems sending the newsletters. Older son John thought it was reasonable to relate this difficulty to subscribers but that it was tacky to name the company. I agree.
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