2011 has been a unique year for gold, with the value reaching record highs and now experiencing a price pullback. Some economists are even going so far as to say that “gold is dead.” Dennis Gartman has made public his decision to sell all gold, and even predicts the market ending with “wholesale or even forced liquidation.” The biggest shock was his labeling of gold now as a “bear market” and his proclamation of “death to the bull.” As a bullion dealer, I’m afraid I must disagree with this sentiment and offer some insight to educate the American investor.
Whether or not gold is truly “dead” comes down to how you view gold and what you do with your purchase. Investors can be divided into two further sub-groups: traders who will be selling gold for immediate profit as if they were selling stocks, and long-term investors who buy gold as insurance, particularly in times of uncertainty. If you are a trader, perhaps you could listen to Gartman; the damage that has been done to the price of gold this year may be detrimental. However, I advise all long-term investors to hold onto their assets right now. And 2012 is expected to hold a strong performance for gold.
Due to the bank solvency crisis, the Euro could disappear, but currency will continue to be printed. For Germany not to relent on this issue would be the same as inviting a deflationary depression. Once money is allowed to be printed once more, gold and silver are expected to advance! Gold could be expected to close 2012 at over $2,500! Meanwhile, the US continues to have an unstable economy, but I find it highly unlikely that the government will allow too much depression to occur during an election year. We can look forward to more money being printed and for markets to be very active.
Beyond 2012, the continuing rise of debt and talk of a future global meltdown all put gold in a very reliable place. There is also always the possibility of a future war, particularly now with relevant events unfolding in the Middle East and US’s loss of its spy drone to Iran. This does not mean we should run to push the panic button yet, but let’s just say that military conflicts are never good for the economy. And economic instability leads to a bull market for gold.
Of course, like any doomsday prediction, fear of losing wealth is something to be wary of, but it certainly does instigate a sense of caution and suggests holding onto gold as a future insurance. This current price pullback should not be seen as a sign to flee from gold, but rather as an invitation to buy up as much insurance as one can, as, all things considered, it actually seems irresponsible to not have some gold! If this dreaded meltdown were to happen tomorrow, those of us with gold would be in a much better position than someone who has stocks.
The price pullback may send some panicking, but as bizarre as it may seem, both history and my own experiences in this business have shown that the best investments are always made at the scariest times. The beginning of the Gulf War, or the early months the market crash of 2008-09, may have been a distressing period, but those who invested in gold during those periods eventually discovered a rewarding outcome!
Gold is the only “stock” in history that has been valuable since Biblical times. It has a track record of reliability spanning millennia! And much like the Biblical story of those who built and worshipped a golden calf, today it seems our traders only worship market of instant profits, unaware of the golden bull; that is to say, a bull market that exists and continues to deliver based on consumer confidence. If gold seems like a bear market today, it is only because the investor is looking with the intent of trading gold in the immediate future. An American investor who is thinking long term are well aware of the powerful and fertile bull out in the field, ready to charge in and drive the bears away.