Tag Archives: gold

10 Reasons Why Gold Should Break $1000 This Year

Posted on by Nirav
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Today’s guest post comes from Bruce, CEO of Superior Gold and includes a free silver coin!

For many years I was a successful real estate investor. However, I realized that the market was getting very speculative and decided to get out while the going was good. In 2003, I sold my last investment property located in North Carolina. At the time, I had many colleagues in the tech sector, finance sector and even senior managers at well known companies all telling me of their plans of quitting their jobs and becoming future Donald Trumps.

To many of them, the real estate investment boom would never end. These weren’t small investors who bought a $100k house and flipped it in 6 months for $160k. No, these were very smart guys who were thinking of playing in the big leagues; backing local builder’s subdivisions, buying spec land on beach frontage and getting into the commercial flipping game. Many of these investments had $250k down-payments!

I would be lying if I said that none of them did well. One of my former associates has done incredibly well, and is one of my best clients now. But for the majority of them, the losses in terms of time, money, and piece of mind has deterred them from ever using the words “real estate” and “investment” in the same sentence!

I only bring this story up, because at the time I was 3 years into my precious metals business. I had felt that it was not only a good time be investing in gold, but to become a seller and promoter of gold. As a gold broker I tried to persuade many of my colleagues to diversify their 401(k), IRA’s and savings account into gold. If you think selling houses is difficult today, try to convince an upwardly mobile 30-something that allocating a portion of their earnings into gold was the right thing to do in 2003. My, how things have changed! Gold Bullion is on a tear, rising over 250% from January 31st 2003 to January 31st, 2008. And in 2007 alone, gold rose more than 30%. Not bad for the world’s oldest currency.

I strongly believe that gold will rise even higher this year and that everyone should have a portion of their investments diversified into gold. While I know that not every reader will agree with me, I would challenge you to provide a safer place to store your money in 2008.

Here’s why I think gold will break $1000/Oz this year:

1. Oil prices continue race to peak levels and for the first time in history GOLD has taken a peak road of it’s own.
2. Iraq war will not end in 2008, not likely 2009 furthering your contribution to the war fund by all Americans. In times of uncertainity, gold always does well.
3. Real estate market has years to recovery, more than likely a minimum of 4-7 years. Yet another sector that faces great uncertainity. Again, bullish for gold.
4. Job losses are continuing to mount in the American market where Corporations continue to outsource American jobs overseas.
5. China and India continue to record a demand for gold as America continues to enrich their economy based on goods made in their country.
6. European Central Banks will not be able to make available GOLD to other foreign countries thereby creating a shortage. By holding onto it,they’re increasing their wealth.
7. The US Federal Reserve continues to deny that inflation exists and in trying to quell to recession,it will be forced to decrease interest rates. This will weaken the dollar, which has an inverse relation to gold prices.
8. The government faces future obligations for Social Security and Medicaid worth $57 Trillion. It is promoting a weak dollar through increased the money supply to make it easier to repay debt.This will also push up the price of gold.
9. Global markets, while usually non-correlated, usually re-couple on the downside. Stock markets are usually inversely co-related to the price of gold. Seeing the worldwide correction in markets last month bodes well for the price of gold.
10. Gold is still undervalued. Adjusting for inflation, it will have to hit $2,300/Oz to achieve parity with the peak that occurred in 1980.

As President of the Superior Gold Group, I oversee a knowledgable and informed team of client specialist. We specialize in assisting clients diversify their portfolios by targeting a healthy 30-40% of their retirement funds and or personal savings into gold and other precious metals investments. Unlike other gold brokers we know that investments come in many shapes and sizes, but we advise our clients to never leave their nest egg in one basket. We would love to discuss how we can assist you. Give us a call at 888.969.6465 ext 102 or visit our site at www.gold101.com.

Clients who get the best results are those that expand their concepts of traditional investing (stocks,mutuals, CD’s, and savings accounts, etc) to include the knowledge of real money (i.e. Gold) and how fiat currencies have historically always led to a countries bankruptcy.

Also, if you mention the Living Off Dividends Blog and request a free information packet on portfolio diversification, we will extend a one-time courtesy gift of a Silver Kennedy half dollar. This half dollar in the early to late 60’s was valued at .50 cents. Today, due to the high prices of silver, it is worth a minimum three (3) to four (4) dollars, making it more valuable than a one dollar bill. How’s that for keeping up with inflation!

Start NOW with Precious metals. Pick up that phone and make the call! 888-969-6465 ext 102.

“Building Wealth You Can Touch With People You Can TRUST! The SUPERIOR GOLD GROUP”

Why The Government Wants A Weaker Dollar

Posted on by Nirav
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As I stated in my last post, the government is bankrupting our economy. I asked Chuck Butler of Everbank.com “why is the government trying to weaken the dollar and if there was any advantage to having a weak dollar?”

He was gracious enough to answer my question:

It’s a political thing… If the Gov’t can show that they are doing what they can for Manufacturing, that equals votes. The main thing though is the dollar is used to attract foreign investment. I’ll explain.

The Gov’t is running a huge deficit, and as long as they are running a huge deficit, they are in need of foreign investment to finance that deficit. The amount of financing needed each day is over $2 Billion.

When a Gov’t needs to attract investment, they can do 1 of 2 things.
1. They can raise interest rates aggressively to attract investment, or…
2. they can allow a debasement of the currency, which acts as a clearing mechanism for investments. When a foreign entity buys a U.S. asset, they need to convert their currency for dollars… If dollars are cheap vis-a-vi the foreigner’s currency, they are in essence buying that asset at a discount.

Given these two choices, a Gov’t will always choose #2… raising interest rates would bring an economy to its knees… so #2 is the always the choice… and that’s where we are today.

There you have it folks! Debasing the currency is always the better choice! I’m so glad I bought some gold. There also seems to be some evidence that foreign countries are finding the US dollar cheap enough to bring manufacturing jobs back to the US!

An added bonus to debasing the currency is that the 30 year bond, which pays less than the current rate of inflation, will be worthless in 30 years. In other words, the government will be repaying its debt with worthless currency. Suddenly the $57 Trillion of future debt obligations (Social Security and Medicaid) doesn’t seem so bad!

Friday’s Rant: Its the Government, Stupid!

Posted on by Nirav
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In the past week or so, the Federal Reserve has lowered the interest rates 1.25%. Today they’ve announced that they’re going to lend out $60 Billion to cash-strapped banks to prevent a credit crunch and to maintain liquidity in the economy.

By lending out money below the real rate of inflation, the bank is essentially handing out free money. Basically, Ben Bernanke is giving away a truckload of money to anyone who asks for it!

My guess is he’s going to keep lowering the interest rates for the remainder of 2008 until we’re at a 1% Federal Funds rate.

Since the US consumer can no longer refinance his house to fulfill his appetitive for consumption, Bernanke’s hoping that low interest rate consumer loans will continue to fuel consumption. After all, we’re a consumption based economy (as opposed to other countries, who actually make goods). Evidence of this is provided by the Economic Stimulus package worth $150 Billion. Since our economy is $15 Trillion, I guess $150 Billion will make 1-2 months look good, long enough for President Bush to claim that the economy has turned around as he gracefully exits office.

By lowering the interest rates after the dot-com bust in order to prevent a major recession, Greenspan caused the housing bubble. And now, Bernanke in trying to prevent the recession that should’ve occurred in a few years ago, is probably going to create a credit card/personal loan bubble.

I’m sure Wall Street will come up with a novel way to bundle $100 million portfolios of unsecured personal loans and palm them off to some unsuspecting foreign country. Of course, they’ll make a quick buck without assuming any risk, but more importantly, they’ll provide a risk-adjusted yield for their clients and provide necessary liquidity for the banks.  Standard & Poors will issue AAA credit ratings to products they can barely understand. As usual, Goldman Sachs will start shorting the very products its selling to its clients and make even more money!

Meanwhile, the government has dis-incentivized  savings, which it doesn’t believe in anyway. Why else would we have a budget that’s only $400 Billion in deficit (excluding the cost of the Iraqi War and future debt obligations)?

The government is funding its growth (yes, the government never has a recession – its always growing) through the sale of US Treasury bills and has no intention of ever becoming debt-free. As the world’s largest debtor nation, we don’t even have a plan towards economic recovery or paying off our debts.

I think the government and Federal Reserve are leading the US down the path of bankruptcy.  Of course by the time we all realize it, it’ll be too late.

Have Gold Prices Peaked?

Posted on by Nirav
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In case you were asleep, last week saw gold break all records and almost closed at $900/Oz. I still think its a good time to buy for long term investors. Lets see what other investment advisers think.

According to Merill Lynch, we’re already in a recession and according to Richard Russell of the Dow Letters, we’re entering a bear market.

The operative thesis for investors at this time is that the primary trend has turned down. A bear market is in progress. What does this mean? I’ve outlined this many times before, but here goes again – the position I favor here is cash and gold, a lot of gold. You can buy GLD, you can buy gold coins, and you can also buy GDX, which represents a list of gold mining shares. The important thing is to have a good position in all things golden.

I don’t know how far this bear market is fated to carry. Nor do I know how long it will last. My advice – be prepared for the worst and hope for the best. To hope costs you nothing, but to be unprepared can cost you much, maybe more than you can imagine at what probably is this early phase of the bear market.

Through over half a century of experience, I’ve learned to respect bear markets. I don’t trade them, I don’t fade them, I don’t short them – I stay out of them. I’ve learned to stay on the sidelines.

According to the Financial Times, Gold is the new global currency.

There was a time when gold was money. In today’s uncertain world, the yellow metal is back in fashion. Bullion prices rose to a record nominal high after the assassination of Benazir Bhutto in Pakistan added to nervousness about the world economy. Part of gold’s allure is its traditional status as a safe haven. It is seen as a store of value when everything else seems risky. But the bigger drivers behind the rising spot price are a depreciating dollar and the prospect of negative US real interest rates.

A better way to think of gold may be as central bankers used to before America dropped the gold standard: not as a commodity, but as another currency. As long as the dollar stays weak, gold’s bull run will last.

The arguments for further gains in the gold price are compelling. It looks cheap, despite climbing from a low of about $250 a troy ounce in 1999, when central banks were selling reserves. The UK’s decision back then to sell 60 per cent of its official holdings looks particularly poor judgment.

Gold is benefiting from diversification away from equities. Commodities have emerged as a distinct asset class, with billions of dollars poured into exchange traded funds. Physical demand for jewellery may have stalled in Asia, but consumption remains strong in the Middle East. Declining output in South Africa will help support spot prices.

But it is the relationship between the dollar and the reaction of the world’s central banks to the credit squeeze that some bulls would say really makes gold an attractive bet. The US Federal Reserve’s aggressive, rate-cutting response to the credit squeeze has created a risk of a sharp rise in American inflation. That in turn creates the risk of a precipitous fall in the dollar and so makes gold more attractive as a hedge.

The world’s major economies have experienced rapid money supply growth of 10 per cent plus per annum in recent years. The Fed remains the world’s biggest holder of gold, yet supplies of the metal are no longer growing annually. If gold is a finite currency, its value against not just the dollar, but sterling and the euro too, should rise.

Moreover, a sharp decline in US real interest rates – financial markets expect another half percentage point cut this month – means that the low yield on gold matters less. It may have been a poor hedge against inflation in the past but the combination of rising consumer prices and economic stagnation may make it a better store of value.

GaveKal also thinks its an ideal environment to own gold.

Gold has been an exceptional play, having risen +36% since mid-August. Of course, this marks the period in which the credit crunch drove the Fed to cut its discount rate, join the ECB in a series of liquidity injections, and begin stepping down the Fed Funds rate. However, these were not the only factors at play. The past six months has provided the ideal environment for gold:

1. Demand from Asia was on the rise;
2. Demand from the Middle East was also on the rise;
3. Real rates around the globe were fairly low;
4. And then came the credit crunch and the housing bust; and
5. Fears of currency debasement have escalated.

“Indeed, when it seems like things cannot get any better, they often do not. And, for example, if China were to really liberalize its capital markets, gold prices could lose a lot of steam. However, until something significant knocks off this surge in demand, it is hard to see gold retreating.

And Richard Russel believes gold is still a bargain.

What can I buy today at 1979-1980 prices? Russell, you’ve got to be kidding. Everything is much more expensive today. Forget those prices of 1979-1980. Get into reality, man.

Wait, there is one thing that I can buy today at around 1979-1980 prices. That one thing is gold. Gold today is selling just a bit higher than it sold for back in January 1980. How can that be? Brother, it be. Today you can buy gold for just a few percentages more than gold sold for at its high in January 1980.

‘Hey Russell, does that mean that gold is a bargain?’ My answer is that I don’t think of gold in terms of it being bargain-priced, I simply think of it as real money that is catching up to the times. I can’t buy the Dow at its 1980 price of 850. Hardly, the Dow is selling at 14 times its 1980 prices. Well then, how is it that gold is still under 900? That’s a long story, but let’s just say that I really don’t know. I do know that gold is underpriced compared with almost anything else. So yeah, when I think about it, yes, gold is a bargain. And I like bargains – particularly when the bargain happens to be real money.

I’m sticking to my belief that gold will break $2,500 in this cycle and probably reach $3,500. But its going to be a volatile ride over the next few years.

Gold Tops Last Year’s High

Posted on by Nirav
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I’ve been spending the past few days writing and re-writing B-school essays for the Jan 3rd deadline. Wasn’t going to post until the 4th, but with gold breaking previous records, I just had too!

Gold is currently trading for $857/oz, beating the previous high of $850/Oz that was set 28 years ago! (although the intra-day price was nearly $875, it didn’t close at that price). Gold was up a stellar 37% in 2007. How does that compare to other investments?

Dow Jones: 6.4%

S&P 500: 3.5%

NASDAQ: 9.8%

Oil : 57%

Shanghai : 96%

Brazil: 76%

India: 74%

Ireland: -25%

Venezuela: -29%

According to CNNMoney, the best and worst US real estate markets in 2007 were:

Bismark, ND: 15.3%

Salt Lake City: 14.5%

Yakima, WA: 13.6%

Binghamton, NY: 11.4%

Charlotte, NC: 11.0%

Palm Bay, FL: -12.4%

Sacramento, CA: -10.5%

Sarasota, FL : -10%

New Orleans, LA : -8.2%

Hagerstown, MD : – 8.0%

So what lies in store for 2008? Will gold hit $1,000/Oz and oil $125/barrel? Will the average national house price which dropped 3.3% last year drop another 3-4%? I bloody well hope so!

Is The US’s Economic Strength On A Permanent Decline?

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Jim Rogers thinks the US has lost its title as the world’s economic engine. He thinks the subprime mess will last for years, Bernanke doesn’t know anything about the economy and should resign, the US dollar is on a permanent decline and China will become the world’s foremost economic power.

Everyone is recognizing the weakness of the US economy and Federal Reserves lack of interest in a strong dollar. Realizing that the dollar is going to continue its free fall,  everyone from super-models to rappers are dissing the dollar. Even OPEC wants oil priced in a non-US dollar based currency, which it called “a worthless piece of paper”.

Don’t say I didn’t warn you! Its still not too late to buy gold and replace your dollar-based assets with foreign currencies.

Here’s an interesting article from England’s Standard newspaper:

Six more hard years tipped for subprime fallout

Benjamin Scent

Monday, November 19, 2007

The US subprime crisis will continue for years to come and America may be facing a permanent decline as an economic power, famed investment guru Jim Rogers said over the weekend.

“The situation is going to continue to deteriorate,” he said in Hong Kong.

“When you have a bubble, it normally takes years to work out all the ramifications.”

The subprime crisis is not over, Rogers said.

“I think we have a long way to go before it’s finished,” he said later at a conference. “When you have a bubble like this, it usually takes five to six years to clean it up.”

Rogers said not many people have lost their houses yet despite a credit bubble that allowed Americans to buy a house with no down payment – a situation unprecedented in US history.

But he said many will lose their homes before the crisis is over.

“Inflation’s going to get much worse. You are going to have more people losing money. You’re going to have more bankruptcies,” he said.

On top of his dire prognosis, Rogers said he does not see anything that could be done to save the day.

But, he said, any steps the US authorities take to try and stop a recession will not help the economy anyway.

“Let it happen,” he said. “There are these bad elements in the economy that need to be cleaned out.”

Rogers said that America’s position as an economic power may be starting a permanent decline.

“The United States has certainly peaked,” he said.

“America, in [my daughter’s] lifetime, will certainly be a shadow of its former self.” Rogers has one daughter, Happy, who is four.

China will be the “next great country in the world,” following Britain’s economic dominance in the 19th century and the United States after that.

He said of the ramifications of a devalued dollar: “You’ve got to figure out ways to protect yourselves. It’s going to change, the world as we know it.”

The dollar’s decline is getting “very bad,” he said.

He predicts many countries are going to stop using the US dollar.

In response to reports that Gulf countries, including the United Arab Emirates, are pondering dropping their currencies’ pegs to the US dollar, he noted some countries had already done so and expects more to follow suit.

“In 20 years, very few [countries] will have their reserves in US dollars – very few,” Rogers said. “You have to be nuts to buy US dollars in the twenty-first century.”

Rogers also called on US Federal Reserve chairman Ben Bernanke to resign for devaluing the greenback.

“All he knows about is printing money, and he’s doing it,” Rogers said. “He doesn’t know about the value of the dollar; he doesn’t care about the value of the dollar.”

The bow-tied investment sage, who helped launch the Quantum Fund with George Soros, said the yuan could replace the US dollar as the world’s reserve currency in 15 years, after it becomes fully convertible.

“I don’t suspect the euro’s going to last 15 to 20 years from now,” Rogers said.

“The yen will never be able to replace the dollar.”

Still Haven’t Bought Any Gold?

Posted on by Nirav
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Legendary investor, Jim Rogers thinks Fed Chairman, Ben Bernanke is a complete moron who “doesn’t understand how the economy works”. He’s selling all his possessions in the US, exchanging all his dollars for the Chinese remnimbi and moving to Asia. If you think he’s overreacting and the dollar can’t stay down, consider that its dropped against almost all major currencies this year. The dollar has seen some strength this week. Use this temporary bounce in the dollar to take a position in gold or other currencies.

“Nations are not ruined by one act of violence, but quite often, gradually, and almost imperceptibly, by the depreciation of their currency, through excessive quantity”.
— Nicolas Copernicus, 1525

“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge – even to ourselves – that we’ve been so credulous.”
— Carl Sagan

“Once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities will not cease to rise, everybody becomes eager to buy as much as possible and restrict his cash holdings to minimum size… If the credit expansion is not stopped in time, the boom turns to crack-up boom: the flight into real values begins, and the whole monetary system founders.”
— Ludwig von Mises (1949)

Gold Breaks $800/Oz

Posted on by Nirav
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Reacting to the Federal Reserve’s rate cut today, gold surged past the $800 barrier for the first time since 1980! I’ve been hawking gold as an investment for 2 years and no one’s been listening to me!

According to a press release today:

Gold last topped $800 an ounce in 1980, when prices reached as high as $875 an ounce in January. Adjusted for inflation, an $800 ounce of gold in 1980 would be worth more than $2,000 today.

I think that gold will probably hit atleast $2,200 if not more.  Some people are predicting higher amounts, like $3,500. I’m not sure. But I do know the US Dollar is a lousy investment right now.

Oil closed at $94.51 and the Canadian Dollar now cost $1.06!

Jim Rogers Backs The US Dollar

Posted on by Nirav
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Jim Rogers, co-founder of Quantum Fund along with George Soros, achieved 4,000% returns in the 80’s. He’s famous for being bearish on the US economy and the US Dollar. However, he’s currently bullish on the Dollar, saying that everyone is negative on it.

In his opinion, when too many people take one side of a trade, the opposite is likely to happen. The Dollar has been in a bear market since 2002, but it turned bullish during 2005. He thinks its over-sold and in the short-term at least, due for a correction.

While I’m not buying any Dollars, I could definitely use a spike in the USD for my entry point into Australian Dollars.

Many claim the dollar’s weakness is helping offset a dropoff in U.S. economic demand that’s come from a recession in the housing market. Goods priced in dollars are cheaper in Europe or Australia, and manufacturing in the U.S. becomes more attractive for companies that export goods. That helps preserve jobs in the U.S.

But a debased currency is a hefty price to pay for growth, and not an easily reversible one, says Rogers. It breeds inflation and weak purchasing power, which ultimately undermines any short-term boost in growth. He reiterated his belief that the U.S. dollar is bound for a decline similar to the British pound’s 50% decline in the early 1980s.

He’s not very impressed with Bernanke lowering the interest rates either.

“The fool went and cut interest rates with the stock market down 6%,” he says of Fed Chairman Ben Bernanke. “What’s he going to do when stocks are down 30%?”

He says Bernanke and the Fed are ignoring obvious evidence of inflation in food, education and entertainment prices.

“This is a man who’s made a career learning about printing money and now we’ve handed him the printing press,” he says, likening Bernanke to his predecessor Alan Greenspan in their penchant for saving the markets by cutting rates and inflating asset bubbles.

Rogers is a believer in the global growth story, particularly China’s. He said he’s sold out of all his emerging market investments except for his investments in China, claiming the other emerging nations have “been exploited by 20,000 MBAs running around looking for markets.”

Rogers hopes he’ll be able to pass down his Chinese stocks to his 4-year-old daughter, but adds he may be forced to sell.

“If a bubble develops in China in the next year or two, I’ll have to sell because bubbles end badly,” says Rogers, pointing to Japan, where stocks remain well below their levels of over a decade ago. But he believes Chinese stocks would have to double before he’d feel forced to sell.

The self-proclaimed “inactive investor” is not buying much these days. He’s bullish on commodities, though he agreed he’d be hard pressed to find anything to buy at these levels. If he’d buy any commodity it would be in the agricultural space rather than the metals, though he declined to specify one. He’s short the U.S. investment banks along with the dollar.

Next to China, Rogers says he’s long gold.

“I’ll undoubtedly buy more gold,” he says, predicting it will double from here in the next few years.

Gold Hits $750/Oz

Posted on by Nirav
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Today gold hit $750, the highest its been in 28 years. It looks like we might break the previous intra-day high of $850 within the next few months.

There was a slew of bad news today related to the housing industry and inflation worries and both oil and gold reacted by going up. I bought into GDX today which is the gold mining index. I had bought it last year, but I sold it to buy actual gold coins.

 I’m still heavily bullish on gold and I think we’re still in the beginning stages of a rally.  Why do I think so? Because almost everyone I know ridicules my idea of gold being a good investment!!!!

Typically, the average person does his investing by looking through the rear-view miror. He invests in whatever was hot last year or the last few years. I fell prey to that investing mindset early on in my investing adventures. I saw that tech stocks had done phenomenally over the past few years and in late 1999 I dumped all my savings (and some money I borrowed off my credit cards) into the high-flyers and subsequently lost all my money. I later found out that successful investing entails “anticipating the anticipations of others”, to quote John Maynard Keynes.

Once the popular media starts hyping up gold, then the average person will want to get in on it.

In a few years, when my friends start asking me about gold and how to buy, I’ll know its time to get out!

Till, then I’m a gold bull. I’ll take a shiny piece of yellow metal over a green piece of paper with a promise on it anyday!