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I love gold. I love its history. I love the role it’s had in many monetary systems. I love the beauty of gold. I love the versatile uses of gold.
I love gold coins. I love objects made of gold. I love gold’s role in new technologies.
But gold is not the end-all, be-all of the investment world. Nor is it the world’s savior. It is not even a very good hedge against inflation.
The hate mail will pour in again. I’m sure of it. But I have my reasons for giving you the truth, and nothing but the truth, about gold. As despised as I’ll be for the facts I give you today, you need to know the truth.
There are all too many myths and propaganda out there about gold, and if you get caught up in them, you most assuredly will lose the shirt off your back investing in gold.
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| Gold is not the end-all, be-all of the investment world. |
The fact of the matter is that the chief reason promoted to invest in gold — inflation — is dead wrong.
Consider the following:
At the depths of the depression in 1929, an ounce of gold sold for $20. The Dow Industrials was at 40.
An ounce of gold today is roughly $1,300. It has increased 65 times over.
But the Dow Industrials stands at about 15,000. That’s 375 times more than it was in 1929.
And that means since 1930, the Dow has outperformed gold 5.8 times over.
In 1980, gold sold for $850 an ounce. The Dow Industrials was at 824.6. Since then, gold has increased 1.5 times over, and the Dow 18 times.
In 1980, the average price of a single-family home in the U.S. was $68,700.
Today it’s $223,222. It’s increased 3.3 times over (despite the real estate crash five years ago).
Gold’s up just over 50 percent since then.
Now, on the flip side of the coin, since the year 2000, gold’s gained more than 400 percent.
But the Dow Industrials are up a meager 29 percent.
So you see, overall, gold is not as great an inflation hedge as most would like to believe. Certainly not the gold promoters, who want you to buy gold at every twist and turn in the market, forever telling you that it’s the world’s best inflation hedge, when in reality, it is not.
The fact of the matter is this:
First, there are times when gold is a great inflation hedge, and there are times when it is not.
Second, there are times when gold goes up, and there are times when gold goes down, just like any other market or asset class.
Therefore, to maximize your profits in gold, you need to know when to be aggressively in gold, and when not to.
As a corollary, to also maximize your profits, you need to ignore the white noise about gold.
Gold is one of the most emotional markets on the planet, one of the world’s most recognized investments, all over the world.
Yet, it is also the market where the biggest lies are told, the biggest myths are perpetuated, and where the largest amount of misinformation is spread.
I tell you this only because it’s my job to help you protect your wealth. I have no vested interest in doing anything but that.
So bring on the gold investors — and especially the gold dealers and promoters — who will want my scalp for writing this column today. I don’t really give a hoot. All I care about is spreading the historical truth, not BS, propaganda or market myths.
That said, there will soon come a time when it is prudent to load up on gold, but we’re not there yet.
The simple reason is gold’s interim bear market is not yet over.
As you know from my previous columns, I expected a cycle low to form by Oct. 3. We got that low, right on cue at $1,276.90, one day early, on Oct. 2.
But that low did not break the prior low at $1,178. That means the interim bear market is not over yet, and that gold will likely bounce around in a tight trading range for the next few months, then do a swan dive heading into January of next year, where I expect gold will move below $1,178 — and likely bottom around the $1,035 level, or just slightly lower, under $1,000.
And then I will tell you to “back up the truck” on gold. For, you see, during gold’s ensuing new bull market leg higher — it will finally play catch-up with inflation, it will also rise as European and U.S. governments fall from their perches into a heap of rubble — and gold will begin an ascent that will take it to well over $5,000 an ounce.
Timing, in life and in the markets, is everything. Gold is not immune to that law. And it’s just not time for gold to shine again.
If you own gold from much lower levels, as I do and my subscribers do as well, then hold that gold. It’s great insurance. But don’t back up the truck on new purchases yet. Wait until I tell you to do so.
Best wishes, and stay tuned …
Larry
Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.
Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.
{ 10 comments }
What you have left out was that the price of gold up until 1971 was set by world governments as the gold STANDARD price. First up to 1933 set at $20. Then until 1971 at $35 until Nixon took us off the gold standard. No open markets to weigh in during that time.
alot of truth in what you say. this could have been a higher low however, a 2ndary bottom. we shall see
would you sell physical gold at these levels that you bought at same level and re enter at a later date?
I may be ''talking my position'' but it seems to me as though silver getting better support than gold.. This could,of course, be that the industrial use is ''kicking in'' at lower levels..
Would you quarrel with the idea of selling naked puts at say the 21 level basis January?
The worst case would put me long at something less than 21–or receive premium
at expiry..
Your comments on gold history is right on! What most do not realize is that gold is NOT RARE–can be found on every continent in roughly equal amounts per land mass–which strangely is one of keys to its value.
Gold was originality a ''receipt'' or proof of work performed–before faxes, photos or the like. So if a laborer could display a quarter once of gold for his weeks work-it was general 'proof'–at least he had been moving earth .,perhaps in wrong place–BUT did represent a unit of labor.
Gold's ''move'' be be a barter instrument is a bit more complicated–there is a ''school' of thought that argues that gold NEVER moves==other currencies run around gold—meaning of course–gold is the only true currency..Recall if you will, gold was one of three gifts given to the Christ child–not platinum which is 9 times more rare than gold–I have several books on
this topic if any interest–
Both metals are headed substantially lower; this morning they are breaking critical support.†— Best, Larry
I have read Larry Edelson's columns for years as well as many other well respected metals experts. Some of late have come to believe in a similar near term future for gold. One possible explanation might be that people tend to come out of the woodwork promoting an asset's demise when it's been beating down and (probably) at abottom
This is a great article and one that I would tell my fellow Patriots to pay close attention too.
Thanks, Kirk! — Best, Larry
I love it when you state prior predictions as "right on", but previous predictions and timing are not even close. You should become a psychic reader.
Not previous predictions, most current predictions.