Tags: gold | silver | dollar

Gold Has Plenty of Room to Run, Thanks to the US

By    |   Friday, 22 July 2011 10:01 AM EDT

Those who have regularly read my blogs, or are subscribers to one of my two Newsmax services, Gold Stock Adviser and Gold Stock Adviser Pro, might assume that I’m not a big fan of the United States.
After all, much of my investment philosophy regarding gold and gold-related stocks is based on the fundamental economic problems facing the country. As the Federal Reserve printing presses roll and the dollar shrinks ever smaller in value, gold will rise further and further.
I’ve predicted $10,000 an ounce gold in the future, and I have yet to see anything out of the struggling state governments or Washington, D.C. to sway me otherwise.
But that being said, I do love the principles America was founded on: Limited government and personal freedom. Those principles and the American dream have served to make the U.S. the greatest country in the world.
However, at some point you have to “wake up and smell the coffee,” as the saying goes. In this case, that wake-up moment centers on the idea of an economic recovery.
I keep reading and hearing about a recovery that’s underway, or that’s imminent, and it’s just a question of waiting for the jobs to pick up.
Look, I don’t consider myself a perma-bear or “doom-and-gloomer” who’s always predicting the next great crash-and-burn, but on the other hand, the reality for the U.S. is pretty evident: A major long-term recovery just ain’t coming.
The harsh truth of the matter is America is a world empire in decline. Forget the bogus triple AAA Moody’s rating it still sports, an echo of a bygone era — the country is in dire financial shape and teeters on the verge of bankruptcy.
Just look at the numbers, whether it be the U.S. national debt of $14.5 trillion, the state debt of $1.2 trillion, or the unfunded liabilities that just keep growing before your very eyes at www.usdebtclock.org . It’s an unsustainable mountain of debt that can’t possibly be funded by the slowing growth rates and the pressures of an aging population.
In Canada (where I’m from), we went through our own debt crisis in the 80s and 90s. At the time, many Canadians owned U.S. dollars, and would even refer to the currency as the Canadian peso. They understood that our own currency at the time was in trouble, and weren’t hesitant to protect themselves in any way they could, even if that meant scurrying away from Canadian money.
However, flash forward to today’s crisis in the U.S., and you see ambivalence on the part of many Americans. Living in the Bahamas, I come across many citizens on vacation, people with good incomes and money in the bank. To a man, I would say I’ve found 99 percent of them own no gold stocks, no gold, and no other foreign currencies.
What I don’t know is whether its arrogance or ignorance that fuels this trend. Is America so rich that the investors among the population just don’t know any better, and don’t understand what could befall the U.S.? Perhaps they don’t look to the lessons of a former financial superpower who went from being the dominant country in the world to going bankrupt and losing their empire after World War II, and all in the span of just a few decades — the British.
One difference may be both the British and Canadians are self-reflective. In the former case, when the pound was being devalued, people in the U.K. were rushing to the exits to get out of the currency.
Meanwhile, despite the recent bout of debt crises threatening the solvency of the eurozone as a unit, the U.S. dollar is still only 1.42 per euro! While U.S. investors may largely still have their heads in the sand, I think this tells me investors and speculators around the world aren’t buying the dollar as a strong, safe currency any longer. They realize that there is no real plan to reduce the deficit or solve the gaping funding problems associated with Medicare, Medicaid and Social Security.
But let’s circle back to gold, and one of the many reasons I think it has nowhere to go but up. Already, gold has moved from $250 per ounce to $1,600 per ounce, despite the fact that relatively few Americans have participated in the gold market. (Even globally, gold represents only 0.57 percent of all global financial assets; compare that to 1980 and gold’s peak, when that percentage was 2.77 percent.)
Just imagine what happens when Americans do wake up en masse, smell the coffee and recognize that their dollar is in serious decline. Gold will soar.

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Those who have regularly read my blogs, or are subscribers to one of my two Newsmax services, Gold Stock Adviser and Gold Stock Adviser Pro, might assume that I m not a big fan of the United States. After all, much of my investment philosophy regarding gold and gold-related...
Friday, 22 July 2011 10:01 AM
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