Income Tripler

I think gold should be bought as insurance. You have to decide what is the probability that the economy will collapse (hint: the value is not 0)then buy that amount into gold and forget about it. In 20-30 years it will go up.

I’m not a bug, but i am bullish on gold. couldnt you have made the same contrarian points on the internet bubble in 98, 99 or 00? if so, you would have missed 95% of the run. Don’t bubbles end when the shorts throw in the towell and prices capitulate up? i’m afraid you’re very early and not much of a contrarian call when so many people still hate the group and we have seen almost no new funds, hedge funds or serious acquisitions in the space. good luck regardless of how this turns out…just thought i would point out a few things.

Your comment re: the ads for buying gold of any type seems to be contrary unless i’m missing something. Are these buyers loading up on junk?
And are they going to be stuck with it if gold falls? Isn’t gold a tangible money without the liability that undermines printed paper?

The fundamentals for gold are the best ever. Though your points are well made, you wonder why the price of gold hasn’t already made it to the $1000+ point. That shows your lack of knowledge of the precious metals market. Evidence is overwhelming that the US Gov’t and bullion banks have permashorts in. You also take into don’t take into account that spending is only in the bill passage process, money hasn’t spread into the economy. Also, you should note that the Great Depression is not the only type of depressions. We are in month 13 of this “recession” (by economics terms we are in a deflationary depression, which is usually bad for gold). There is also staflation, inflationary and hyperinflationary depression. If you look into the recent and current stimulus bills/laws, it leads to counteract delationary pressures and use the normal gov’t action is to increase inflation. Foreign gov’ts are not sterizing the moneysupply because they have their own ails and currency problems. You maybe correct for a week, but not long term. Your technicals are going against pure fundamentals.

I am a goldbug. I often disagree with you, Mr. Basenese. But this time I think you are right, at least in the short term. Long term, the Fed will ensure gold’s success with the printing press. ONE THING: On #12, you should never, ever base any analysis on what the Fed or President say!! Mr. Basenese, that alone really hurt your credibility. Stick with the Baltic Index. But 11 out of 12 are pretty good.

I think you miss a point regarding “contrarian” decision-making. A true contrarian does not go against the common wisdom arbitrarily.

Contrarian investing recognizes that the crowd is always right EXCEPT at the turns (market tops and bottoms).

The contrarian analyzes the reasons for the current trend, and looks for flaws. If a serious flaw is found, only then does the contrarian invest “against the crowd”.

tom jablonski

You lost me with #12. All your reasons for shorting gold sound right with me as a contrarian, but, I believe we’re only in the 4th inning of this game.

Hi Louis,

I’ve been worry about the fact too many people think gold is the way to go. I’ve also been wondering how to define what is really contrarian.

My first impression is that it might not be contrarian just yet. Even though many star money managers, investment letters, and more worrisome, mass medias have been singing “gold, gold, gold” lately, there seems to be quite a small amount of money invested into gold. I barely found any of my “extended” acquaintances (actually 0 of them) or any wealth managers actually buying gold (ok, these might be on the slightly smarter money side but no effect on them at all… humm…).

This seems far from the real estate and stock mania we’ve seen.

Let’s say, I remain careful, but calling it contrarian just yet doesn’t seem right.

Thanks,
David

The problem with “keeping an open mind” is that people will throw garbage in it!!
Gold is not an “investment”…it is store of value. If you take a measure of a commodity such as wheat and how much of this commodity an ounce of gold would purchase as far back as when the Egyptian Pharaohs ruled you will find that gold still buys about the same amount of wheat as it did then. The fiat paper currencies, especially the U.S. Dollar, lose purchasing power almost daily….this is why you buy gold. Talking someone into parting with an ounce of gold in exchange for a piece of paper with ink on it will require varying quantities of such paper over time….who cares? If I can still buy commodities that I require to sustain life with gold, I’m safe! How much bread can you buy with Weimar Deutchmarks or Confederate notes? In the end, all paper BURNS!!!

While many of your reasons make a good case for shorting gold (at least over the short term, after it’s recent run up), reason #2 is backwards. The informercials from Cash4Gold and its clones are telling the rubes to *sell* gold, not buy it. Just like you.

For as long as my government keeps getting us in debt by over a trillion dollars a year I’m hanging onto my gold. If there is in fact a recovery later this year you’ll finally start to see the inflation that us “gold bugs” have been worrying about. The enormous sums of new money that the Fed has created have so far been sterilized by the world wide deleveraging. Once the real economy is back on track, that new money will push up prices with a vengence.

What kind of an idiot are you? Cash4Gold.com is a site for SELLING your gold - not buying it. Those that respond to the ads are actually betting against gold. Any time the price of gold moves up significantly we see a surge in such companies that BUY gold from people. This is not a predictor of which way gold will go.

I believe the environment has changed any you are looking at this with to much of a short term vision and also an old paradigm. So far this depression has been different than all the recessions of the post WWII era and much more similar in nature to depressions preceeding WWII where the traditional markers dont apply. Secondly, I too have seen an incerease in the infomercial type gold pitches since 2006 when the jewelry store around the corner hung out a banner that they buy precious metals. While it is true lately that the number of infomercials has risen it is still nowhere near the level of real estate ads. Furthermore, even today as I attend parties and events and discuss gold (which I have been accumulating since 2001) everyone’s eyes glaze over or they think it is nuts to buy it. Additionally, over the past month or so I have received multiple(at least 5) letters like this column that predict the same demise of gold for most of the same reasons, yet gold continues to climb the wall of worry…I thnk that in the world of today the rules and gauges you are refering to are badly damaged….this ain’t your grnadfathers depression(borrowed from Oldsmobile..remember them)

Yes, but for these commecials to exist, it means that there are purchasers hungry for gold. It’s an example of over-enthuisism. Remember when models were requesting pay in euros? Infomericals asking for gold - same thing.

Generally those shops are buying gold under the market price and profiting from the difference.

I was actually hoping I’d get a good reason why I should sell gold since I am a trader and I am thinking gold has had a great run and might be due foe a short term pullback. Reading your rant, I was unimpressed.

Here is my view of your points.

1It’s decidedly contrarian.

Very unquantifiable. Useless argument

2The infomercial factor.

Se comment to number 1

3There is always some truth in a rumor.

Time and time again these sales, even when real, have gone from a country to a country with no effect on the market

4The gold-to-oil ratio is out of whack.

This has as much to do with price of gold as ratio of trucks/mountains

5So is the gold-to-silver ratio.

Same line of shallow reasoning

6The HGNSI index is too high at 60.9%.

This argument has a little bit of merit over short term.

7Trinkets drive demand, not governments or speculators. Nearly 75% of gold demand comes from the jewelry market.

This proves to me that you are clueless about the gold market if you thnk that some peasant in india determine global gold prices. Gold is money, not a commodity

8What makes now “different?” If the global economic crisis keeps getting worse, as goldbugs like to point out, why hasn’t gold tested last March’s high of $1,030.80 per ounce? Or blown right by it? After all, gold is supposed to increase in value as economic conditions worsen. But it hasn’t lived up to expectations, not one bit. And I don’t think it ever will. Ultimately, when you factor in the massive amounts of stimulus being injected into the markets, on a global level, we’re close to the worst of times… and the peak for gold.

First, its an antiDollar play and second, if you think that global economy is about to get better, you are smokong crack. We are entering depression!

9Analysts love it. According to Bloomberg, 16 of 24 analysts surveyed by the London Bullion Market Association believe gold will reach a minimum of $1,032 per ounce this year.

Again, you cite analysts of the LBMA alone. What about the vast majority of analysts that hasn’t even considered gold yet. Before it’s over, they will.

10Hedge fund buying dried up.

Very unquantifiable and you fail miserably to substantiate this point.

11Gold is schizophrenic and the wrong personality is in control. Multiple motivations exist to buy gold including the desire for a safe haven, currency, adornment, raw material, or inflation hedge.

There is only one real reason for buying gold. Value of the fiat currency is dissintegratin and gold can hedge that. Nothing else.

12The Fed, the President, history and the Baltic Dry Index concur - the economy’s on the mend.

Again, lay down the pipe. The economy is just entering depression and it will be a YEARS event, not months. In the meantime the printing will go unabated.

Short term gold might fall to say, $870 but the long term it’s headed to $ thousands as guaranteed by FIAT.

If you have to get out of gold and book in the gains, great. Dont do it because these REALLY weak and peripheral arguments.

Good luck to all

yep,
sld my gld calls today, looking for a one week correction into next friday. If u need a fundamental reason for a bottom next friday, Hillary will be in China trying to convince them to hold onto their treasuries. With all the new treasury paper hitting the streets these days, my guess is gold has a long way to go. Cash for gold, silly, that’s a recommendation to sell, not buy. I’ll be in there buying next thursday or friday, depending on my technicals. Gotta love the 30yr bond volatility today. The economy, not even close to a bottom, as bama said, we don’t produce nothing competative for sale. Until that time, the chit continues to hit the fan. Commercial real estate is a huge asset behind bank loans. I don’t c a bottom there for sure, as a matter of fact, commercial is just getting started to the downside.

Hi, I liked the article and liked the comments from the readers also.
One thing I found particularly interesting for a case for expecting it to go short term was something that I’ve heard of and somewhat have experienced with Equity trading is that when media and the press and people standing around the water cooler or in public places and events are a buzzing about anything that may be the greatest thing since sliced bread; then it may be the top and time to bail. So we may be nearing a bail for Gold holders to bail and lock in some profits for the short term.
But it is my estimation on what I think I know, is that this is not necessarily so true a way o thinking or in practice with things that have intrinsic value such as precious metals, base metals, oil and such, but after following the Equities and Commodities markets nearly daily over the course of roughly the last three years nearly nothing makes sense.
Historically most of the time the two types of markets mentioned above, move in a juxtaposed fashion yet in the last couple to three years or so have moved almost in lockstep fashion.
It appears to me that much of this lock step fashion has disappeared in the last roughly 9 months, but hey I’m not an expert on either of the fore-mentioned markets, I’m just trying to earn a decent living and understand what is going on.
I liked what a couple or so folks wrote about in that the FED’s printing press basically is guaranteeing that things such as gold and other things with intrinsic value are going to go up in price, because it will take more paper money to purchase them.
Also I liked what Roger said about speaking with people whose “eyes glaze over” when advocating the purchase of gold. I’ve seen this also within even my family and it’s just mind boggling.

Thanks!

Perfectly said!

Forget “making money” with your (contrarian) investments. Batten down the hatches, wait for the storm to pass, and hold your wealth in whatever will buy a can of beans to feed the kids. Paper with pretty pictures printed on it sure won’t cut it, gold MIGHT.

Lou,

Who cares if you’ve been “dead on” on a few market predictions. Even Jim Cramer gets a few right every once in a while. What’s your real track record for making people money? Publish an impressive track record and I might pay attention to you. Otherwise, your just another young analyst who thinks he’s got the magic touch and will never be wrong. From my perspective, your intuition is not good because you overlook the obvious that almost everyone sees - the “bullish on gold” crowd by no means is in a state of “over exuberance”. Your wrong on this one youngster.

Not to argue with your prediction of falling gold prices, I just think your timing is a bit early. Margin calls can be wicked on a large short position when gold peaks before falling.

The idea that gold has reached the “fad” AKA “saturation” stage is absolutely insane on the face of it! Tell me, what percentage of americans (or westerners, or earthlings) own stock and/or bond (paper) investments? Now tell me, what percentage of amercians (or westerners, or earthlings) own real physical asset investments like gold, silver, platinum, palladium?

The above consideration alone makes totally clear that investment in real physical assets has astronomical room to grow! True, that alone does not assure physical assets will ever reach the level of acceptance as [mostly bogus/fraudulant/hype-based] paper assets, but the difference is so huge, that physical asset investment could increase 100 fold without closing the gap.

Furthermore, if ever in the history of mankind has the BS nature of “paper assets” been clearer, I don’t know when that was. If average humans grow even one tenth of a brain, they would all ditch their “paper assets” and “get real” (which means, physical assets - either commodities, or better yet when practical, productive machinery they can and will operate themselves).

It is sooooo easy to write articles like this, then loudly trumpet how “you were right… during whatever tiny timeframe gold temporarily pulls back”. That would, of course, ignore the fact that most people are buying gold for multi-year to multi-decade time frames, and ignore the fact that overall you were totally full of smoke and mirrors.

Just watch gold hold its value while world currencies die a painful death over the next few years.

Paper is for starting fires and wiping butts.

In gold we trust.

Gold is insurance. Simply buy it using dollar-cost averaging. You’ll want it to go down short-term so your buck will buy more. If you pay 900/ounce today you should love it if it is available for 450 tomorrow–because you’ll get twice as much.

I look back at the tech mania and the real estate mania and in both of thsoe markets everyone I knew and worked with on a daily basis were talking about tech stocks and real estate. No one I come into contact on a daily basis today is talking about gold, not even close, we have along ways to go before we are in a gold rush mania.I remember some smart investor saying you know when you are in a bubble when the taxi cab driver or the guy that shines your shoes is talking about his tech stocks or real estate, wheb that happens with gold it will be time to sell!!

First and foremost, gold & silver have been advancing for the past 8 years DESPITE the blatant manipulation by just a handful of very powerful “banks”. What they are doing is criminal, and if the CFTC ever gets the guts to really investigate it and bring it to court, the metals would skyrocket!! Go to GATA’s website for more information about gold, and do a google search on Ted Butler and read his excellent articles on silver. Secondly, I believe this recession (not ready to use the “D” word..yet)will be like no other. At no other time in history has so much wealth vanished and gotten so many people in trouble. This is a pandemic!! Also, yes, you’re starting to see more commercials/infomercials these days, but the public still really isn’t in either of these markets. When I’m standing in line and I hear a grandma asking the bank employee about gold American Eagles, then I might start unloading my pyhical inventory. And, of course, we cannot forget the printing presses are running 24/7/365 over at the Treasury. At some point, that is going to catch up with us!! And last but not least, I usually only use technical analysis for my trading, and the daily, weekly and monthly trends are all sideways to up. Good luck all!! Hope we all can make some nice coin!!!

Actually, Lou’s track record for making his clients money is quite impresive. We’ll have to work on promoting that a bit more. And as for your last point, as anyone will tell you, its not the years, it’s the mileage.

This comparison is not correct. Those models are thinking of hanging on to their Euros for a while. The gold peeps are planning on ripping off gold sellers and turning a profit immediately. They are not buying gold because they think it is a good long-term strategy to have gold, they are buying because there are a lot of desperate people looking for cash.

those infomercials are telling people it’s a good time to SELL your gold. the contrarian view then would be it’s a good time to BUY gold.

a year from now, we will see the perfect storm of inflation. [1] investors are buying up foreclosures and setting a bottom for real estate. [2] experts say oil prices cannot stay this low.[3] there is a one year lag between printing gobs of money, and the insuing inflation.

A provocative contrarian view, whatever your definition of that word. Here’s my 2 cents worth.
I’ve got mileage and years and have lost thousands in silver, copper, platinum and gold mmarkets over the years–made a little too here and there. I will buy gold ‘over time’ because the wisest thing that anyone said in these comments to the article was that gold (all precious metals really) is a store of value and, as such, should be a hedge against fiat currencies in all countries. bvuy a little, buy a lot, but buy some and keep doing it…whatever your budget will allow. It’s hard to mine, it’s rare and it is one of the few time-tested insurance policies of real wealth.

Actually, if you want to buy pre-1933 gold coins right now, it will easily cost you more than the previous high for one ounce of gold bullion for a one-ounce coin. This was not true until recently as the coin market had been lagging behind. It is now starting to outperform. Bullion is also at a premium above the market price for gold. In other words, there is a big disconnect between the physical market for gold and the paper market.

Whenever Lou writes an article like this, he NEVER, EVER talks about the money printing presses. It is as though the government’s printing of money has no impact on the value of gold to him, as though the Weimar Republic never happened, and Zimbabwe does not exist. He also neglected to talk about gold in terms of other currencies, where it is hitting new highs because the dollar is the “last fiat standing.”

As for Lou’s great calls, how about that article a few months ago saying we should all stay in the market all the time, that it was better than holding cash. You seem to have conveniently forgotten about that one.

So buy your physical gold, hold onto it, and relax.

I see my prior comment has been “moderated” away.
InvestmentU evidently still employs the rose colored glasses philosophy and can’t cope with comments that disagree with their pet “senior analyst”. Nothing’s improved here since last year. Back in 12 months to check progress….

When my cousin Vinnie pulls me aside at the family reunion and tells me he is about to make a fortune investing in gold - that’s the true sign of over exuberance in the gold markets. Lou makes some impressive points to be sure, but I think he is wrong to suggest that gold has peaked over the intermediate to long term. For Lou to be correct would imply that America has honest, intelligent, and responsible politicians. Time will tell.

A historical view from France:
Our previously wealthy family had lost 99% of their wealth safely invested in banks and national bonds from 1900 to 1945.
I was charged in 1943 to hide the family gold from the occupying german army.
The penalty for doing this was death.
Saving the gold was more important than saving one’s life.
Enough said!

# 2 & 5 are dead wrong. Also the gold & silver paper markets are not free. Spend time with http://www.butlerresearch.com to see facts on the illegal huge short positions on gold & silver. Your ideas would be better saying go long silver and short gold. Silver is the place to be as silver will more than triple in price in less than 2 years,maybe 2 months when the shorts default.

Cash4Gold BUYS your old gold jewelry…for pennies on the dollar! I foolishly sent them about 3 ounces of broken jewelery and one-of-a-kind earrings that I had saved in a ziplock for years, mostly 10k, but some was 14k and they sent back 20 bucks! Gold was about $400 at the time. That’s a business I’d like to be in! I buy gold and silver now just as insurance.

You may want to view this video with Peter Schiff in Saudia Arabia telling the crowd to ditch the US dollar in favor of GOLD

Gold is for Fools. The best investments are things like lead, brass, steel, paper, glycerin, etc. I also like tin.

These best investments are useful in a good economy or a bad economy. When things are good, bring me your gold and I will give you a tin full of beans. When things are really bad your gold won’t buy one tin of beans. When things are really bad I’ll keep my tin, paper, glycerin, etc. and if you make a pest of yourself with all your gold, you might get some free lead!

Everyone should trade in the gold on real physical assets. JK

I’m holding my breath on the gold subject because our new Pres. is friendly with Gordon Brown, U.K. Prime Min. who, when he was the Exchequer, SOLD 70+% of the U.K.’s gold!

What’s the possibility that the new Admin here wouldn’t try the same trick, assuming it’s still in Ft. Knox?

How about some comments, please.

All of you have not been consideirng other areas in your discussion. If you take the UK, the UAE, China, Singapore, and Hong Kong which I have been to recently, the global economy is stinking so badly that even rich Dubai’s construction cranes are grinding to a halt. Properties in Singapore, Hong Kong, and China are down deep compared to a year ago and the predictions are they are going to go down some more. Unemployment in China has been reported to be a staggerring 22 M (the official figure) and the authorities are concern for jobs creation. Both the Singapore and Hong Kong government are predicting large unemployment. The Hong Kong government has been sending out signals that the second wave of the financial tsunami is going to hit soon.

Of course, there are some interesting positive news took. The volumne in the China equity market has picked up and surpassed those of pre-financial tsunami time. The A-shars (only traded in China) are up and ETF funds are also up 20% in a few days.

I live in the far east and I am concern about the state of the USD. Foreign currencies have climbed against the USD pre-2008 showing the gradual decline fo the dollar. Recently, these currencies have declined against the dollar. The news that I have been reading from the US is that this is a short term thing because of a flight to safety. Safety? Out of ignorance perhaps.

By the way, have you guys heard of Paulson’s last visit to China before the end of the Bush administration? Paulson went to China to ask for help and to sell US debt. China did not say they are not buying. Wen Jiabao only said China can only help itself. (You get the message here?)

The new guy who took over from Paulson, the G guy, he knows nothing about international diplomacy. Is this a reflection of ignorance or posturng of the US to later refuse to acknowledge its debt? The US has done it before and will do it again. If you do the math, the country is dead broke.

My point is, gold is a good headge for a falling dollar and a very unclear and sick US economy. Some readers mentioned that gold is money and it has stored value and I am beginning to believe it. I think I will go out and buy some gold. If the price of gold falls as predicted, then I will buy more on the dip.

well put, lp on both posts. i, too, see a lot of smart money buying low priced houses and gold. inflation will be their best friend when it happens, and it will.

Dear LOUIS,THE IMF ARE WAITING FOR CONGRESS, TO GIVE THEM THE GO AHEAD TO SELL 403 TONNES OF GOLD.I GOT THIS INFORMATION FROM:KITCO.CO.LAST WEDNESDAY OR THURSDAY.ALSO THERE WERE TWO OTHER WEBSITES SAYING SOMETHING SIMILAR.ALSO GERMANY WANT TO SELL GOLD.THIS IS ALL TO DO WITH THE IMF BAILING OUT SEVERAL BANKS ACCROSS THE WORLD.IS THERE ANY WAY OF FINDING OUT WHEN WILL THIS HAPPEN.GOD BLESS PATRICK O SULLIVAN(LIVING IN IRELAND)

Short gold Long on oil. Gold can make you feel warm inside but cannot stave hunger or heat your house. It can buy these goods but in the amounts most people fell safe storing personal supplies will quikly dry up. And furthermore under harsh cicumstances would be sold for whatever to make another day or week. SHORT GOLD

as a veteran trader i’ll forego the technamentals
and offer this timeless adage ” a market will not fall significantly untill every short is dead !! ”
ie it’s the shorts that will push this market to
incredible heights…

4 Characteristics of gold: intrinsic value, durable, easily divided, demand. 3 out of 4 are absolutes, the 4th is the variable ( demand ). I might add paper money had these 4 but as of late I question its intrinsic value. Guns, they too have these qualities, interesting! I believe the big money is driving the gold variable up so they can flood the market with high priced gold , then buy it back at a later date for 650.00/ oz. By the way that is my price target down,for this year. This huge loss will drive away most investors and not so seasoned traders, leaving the big money to collect the spoils. Just in time to hedge global inflation. I have not as of to date read any commentary on U.S. I bonds. I believe this bond is a leading indicator. 2 years ago you could purchase 30K from your bank and 30K on line from the treasury. A total of 60K. This past year the maximum purchase for the year was 10K. This is the feds telling us that they are not going to subsidize inflation that they see coming. That is the time to go long gold when this activity comes to market.

Could we have IDE Russell McDoug answer this topic

If gold is a store of value (money) then the Dow Jones Average has declined close to 90% over the last 10 years from 40+ oz. to 8 or so Oz. What do you make of this? I am still scratching my head.

#7 is patently wrong.

I don’t disagree with you that gold isn’t ready for a correction or even a 50% drop… but let’s get the facts straight.

The actual supply and demand of gold production each year is dwarfed massively by the amount of gold that trades hand in the futures markets as well as physical delivery. Jewelry demand adds up to less than one day’s worth of trading.

Unlike other commodities, the above-ground supply of gold doesn’t get consumed by demand — the majority of gold that has ever been produced still exists in a form available for exchange.

Wow! Obama (the next Jimmy Carter) says per your writing, “President Obama point to the current recession ending by the second half of 2009.” Isn’t this the same Einstein that also:

- Complained that we didn’t have enough “Arabic translators” in Afghanistan — not realizing the natives don’t speak Arabic in Afghanistan, but rather a variety of regional dialects, the most common of which is Pashtun.

- Speaking to military veterans one time, said, “Our nation honors its unbroken line of fallen heroes — and I see many of them in the audience here today.”

- Bragged about passing a law regulating the nuclear industry that it turned out never became a law at all.

- Some days said Venezuela’s dictator Hugo Chavez should suffer “regional isolation” — but then on others he’d say she supported the president’s meeting with Chavez.

-Told one audience about recent tornados in Kansas that had killed 10,000 people. In fact, a dozen people were killed in the tornados.

He referred to the “57 states” that make up the U.S.

there may be a 13th reason for shorting gold. Isnt gold supposed to be a safe haven in inflationary periods? We are in a deflationary period which means gold should be going down. What do you think?

Oil has fallen so hard and so fast that I think it has overshot to the downside due to demand drop and oversupply. However, we are not finding any new fields and this will right itself if the global economy turns around (if it doesn’t, we are all in trouble anyway). So I can see Oil appreciating rapidly towards gold’s value. I think the actions the world is taking to fight deflation and a world depression is going to lead to bad inflation later (in a year or two it should begin) so gold will benefit from that as well. I can see silver and oil rising towards gold’s value and gold more or less holding steady here or going higher.

Like Bank of America, right?

While the possibility of gold falling back dramatically may be correct the analysis here is wrong on so many counts it would take quite a bit of time to go through it.
However, back in the 70’s when agriculture prices went through the roof, the commodity contrary indicators were already at 90%.
The dollar is recovering against foreign currency because it is becoming evident that the entire world is in dire straits.
You own gold in this time because it will have a value as opposed to stocks, bonds, and houses, which have all been manipulated much higher by inflation, and imagination. It should be noted that when the DJ hit it high around 14,000 none of the stocks listed were anywhere near their highs.
When gold broke $301 a few years back, I predicted that it would reach a price of $1680. That is documented along with some of the other predictions that I have made over the last 30 years that were dead on. But of course there have been times that I have been wrong, and to neglect that fact says a lot about those who analyze markets.

1. I concur that shorting gold may be an appropriate trade;
2. I do not agree with all your points. My view is that we will experience a massive deflationary spiral prior to a major inflationary occurrence;
3. Most investments will suffer a major decline at this time including gold;
4. During the late stages of this event many investment opportunities will occur including investing in gold assets;
5. The bailout will fail and we will continue to throw money to make it like it was.

My gut instinct says gold has a long way to go up, but I ignored Louis the last time he said to short gold and I lost a bundle and I ignored Louis when he told me to sell by GBP and buy dollars and I lost another bundle. Also the Gold4Cash people were advertising heavily just before golds last crash.

I’m horribly torn as I am am 50% in gold and 50% in silver (on which I am bullish) so i will set a trailing stop for gold bullion at $925.

During prior economic collapses, governments went on a bean standard, not a gold standard. In post WWi Germany, all the way back to the Anasazi, BEANS were the most reliable source of wealth. Which is why this economic compression is really all about learning to LIVE WITHIN OUR BEANS.
Just ask yourself: in really hard times, like when we had eat Hoover Hogs (rats) for dinner back in the 30s, a man of beans was in demand, not a man with a pocket full of gold. That’s a fact, Jack. I even was offered gold for my bullets and beans, and turned it down, and that’s why I’m still here and Mr. Goldbug is long dead and gone., like the beansleeves of summer..

It is curious to read on the sidelines of your article under Hot Topics, which has an article titled, “Wall Street Bets on Stocks, Not Gold”. You write, “Right now, everyone else is buying gold, or at least recommending it.” What are the facts? Have you got them right?

We all know how smart Wall street experts are and you say you are contrarian!!!!!

Technicals do not show negative divergences so far.

Can I eat gold? I didn’t think so…..
If I have a choice between bread or gold, I’ll eat the bread. So essentially, gold is also worthless.

As investments have become more volitile, perhaps gold will go down 25 percent for a month, then recover up 40 percent the next month.

That way, we can all be right!

If gold goes down, the “gold investor” will simply buy more… We buy because it is the only way to store our wealth… Sounds like to me you have bought into the Obama “spread the wealth” idea… Well, you’re not getting any of mine, and if you become a willing seller I’ll be the willing buyer… Let’s compare positions around 2012…

One thing is for sure. I have been watching price charts for 30 years, and gold is near the “point of recognition.” It is not there yet. We are at a MAKE IT/ or /BREAK IT point. If gold drops here, it will be quick and fast if it is deep. I believe it will be short lived. Every Century gold steps up to regain fiscal control. This much is for sure, if gold move above the 1100 area, buy all you can, for the panic will be on. Gold usually peaks in Feb/Mar and corrects to Aug/Oct–so the call may be a great short term play, but gold’s move above a mark that was set 29 nears ago, is the MOST BULLISH thing an investment can signal. May you all prosper.

While gold has moved up since Oct/Nov, the short positions held by big players has grown as well. I suspect they are the same big players who built the short positions last summer ahead of the collapse in commodities. With the jewelry market (>50% of gold sales) drying up, the perfect “reason” for a sudden drop in this market is available.
The current rise in (paper?)gold sales is being pinned on the “wealthy”, while bullion coins are selling out quickly for huge premiums (to the less wealthy I suspect).
If the jewelry market is down and out, why is physical gold still in short supply? I suspect we will see a fall in prices, as the big players want to get their hands on all the ETF gold they can, and dropping the market price will give them that chance.
The bugs seem happy to suffer through corrections, but I agree w/ Lou that hedging your holdings could be a wise move.

In order to buy anything of value you must do so with the Fiat Currency of the Country. If you own stocks,bonds,notes,bills,ETF’s,Gold Silver or any other asset in order to buy another asset, you must convert to a currency. To make money you must convert to a currency and the timing of the conversion is critical in order to increasing asset value. If you hang on, its gone.

If you are a trader you might want to short gold
for the short term. Get a copy of the movie
“Rollover”.
after viewing it you would think twice about ever
selling and ounce of gold or silver, much less
shorting these metals.

Louise, i think you nailed it with the shorting gold. I am seeing it not in the article itself but in the comments people makes. Check it, there is not a single person that considers the end of the bull market in gold, even some trader showed up with his comments and he has no clue on where the market will turn. And that is the sign that we are in a major top in gold. A lot of bulls will be in pain like never before, selling their positions and seeing their investment disappear, just like every other asset in a depression. Congratulations on seeing this big opportunity. Keep adding positions every 50 bucks on the downside until 450 /550 is reached.

I am surprised at this prediction given that the Oxford Club is pretty good at seeing mega-trends. To accept Louis’s contrarian view, one must believe that the commodity bull mega-trend is over. Do you? Many analysts on TV and a lot of fund managers evidently do. Just check out the sector distribution on many funds, and you will see significant underweights in commodities (energy). The many oracles of “Depression” are saying “cash is king”. The contrarian view is that this is just a short term correction in a long term bull market for commodities including gold. I for one see no way that cash can stay king as worldwide governments will devaluate their currencies to cover massive debts. It is the only way out. Soon no one will want/buy U.S. treasuries and interest rates will rise. (This may have already started). The same logic for Louis believing long term treasuries have had their run also applies to gold. Gold will be the the safe haven from currency devaluation and inflation. I am afraid we are in the early “Acts” of the play. It would be wise to keep some gold (and oil) in your portfolio.

Louis Basenese, Puts forth a list of 12 reasons to short gold. I will give you one reason that over rides every other reason that can be scripted.
The United States Government. This reason and this reason alone is the reason to own as much Gold and Silver as you can handle.
The United States Government is the most corrupt and evil entity on the planet. That is not to say that the American people are. Their government has been stolen from them while they were out playing. We have allowed ourselves to be bamboozled by the politicians from both sides of the isle.
There is only one entity that the American people should have loyalty to. The Constitution. The Constitution and that alone.
Death to Tyrants, Swindlers, Embezzlers and Corrupt Politicians.
The Macy’s Christmas Baby of 1938
approves this message.

What is really coming across is that the Gold Market will be highly volatile for some time - it is the nature of the beast when it is on the move. (It did have a long rest.)

There will be big movements, either way, that will appear to give both sides the support they need for their prognosis. These swings will, unless you watch closely, mask the general trend. (which so far is up) It could come down quite some way, yet still remain in its current trend.

To me, Gold is for trading, or wearing unobtrusively, if you like to see, and feel, it.

One of the best opportunities ever, and which shows you what can happen when you are not paying attention. You could have at least doubled your money in the gold mining sector over the last four months - on the outside.

With a number, you could have trebled your money, and with one or two ( like one I own GSS) - QUADRUPLED.

Now where on else could you have done that.

What are people waiting for - ‘bells, whistles, flashing neons, and a ticker tape parade down 5th Avenue?

Has it finished? I don’t hear any fat lady singing.

Incidentally I did say QUADRUPLED in a max of just FOUR MONTHS.

What´s with you guys? You say gold will go to $1500 an ounce, now you say sell when it´s $925. You guys just lost my confidence in you. I think you are scammers and hustlers. I dare you reply to my comments. Defend yourself you bunch of hustlers.

In the short term I think you are correct but you left out the most important No. 13. That would be the Commercial bank cartel manipulation of the option market as convincingly evidenced by GATA.
As a result you may get lucky on the call too, but for the wrong reasons.

OK I agree with all your points…BUT YOU ARE WAY OFF ON #7. IT IS A BIT RACIAL AND INCORRECT TO SURMISE AND DEPRICATE INDIAN PEASANTS. THE UPPER CLASS IN INDIA ARE MORE SOPHISTICATED AND HAVE MORE EXPENSIVE WEDDINGS THAN THE GODFATHER. THE BRIDES MAY HAVE UP TO $180,000. YES $180k IN GOLD ON THEIR PERSON IN THE FORM OF JEWELS OR PURE GOLD THREADS ON ANY GIVEN DAY OF THE WEEK LONG LAVISH WEDDING CELEBRATIONS. I THINK IT WAS MISGUIDED TO INFER THAT THE ONLY INDIANS WHO BUY GOLD ARE PEASANTS. HAVE YOU SEEN THE AMOUNT OF GOLD FLYING AROUND INDIAN WEDDINGS…AS GIFTS OF BARS AND NUGGETS AND PLATES….AND GOBLETS. Duh! Can peasants afford this? Do you think Indians who can buy this much gold are peasants? There are millions of wealthy upper and upper middle class weddings. The brides family goes into debt at any cost (if necessary) to have enough gold flying around the week long event. So while I liked your points, I think that one was a bit far fetched in terms of downgrading wealthy savvy Indians to peasants.

As I recall the Oxford Club and LOU had BUY BUY BUY recommendations for the whole cycle leading up to the crash….and I never saw so many stop loss triggers as I did coming from Oxford….Lou I do not recall a letter saying to go to the sidelines with cash for the big “summer and fall of hell 2009″. I recall buy buy buy recommendations and I tracked how much was lost on the recommendations leading into the crashes of 09….you did not tell your Oxford Club subscribers to head for cover and get into a defensive high cash position so why all the jive about your big predictions. Will you publish this at all?

Exactly my thoughts too. 11 great points but point 12 was a shocker!

CONTRARIAN INVESTMENT CRITIQUE: I agree to a point with the overall gist, because I have always felt that gold is more a store of value than an investment. But, let’s go further and read between the lines of not only this particular article, but the overall picture of what is happening. One needs to ask a question: If all of one’s wealth was denominated in physical gold, would one use this to purchase such things as paper currency? Conversely, gold or real money has no practical use other than those pointed out and therefore is not very appealing as an investment except perhaps by day-traders and the like. As a store value for thousands of years, what difference does a few hours, days, months or even years in the overall scheme make? Most of the gold ever mined and produced is still in existence so it only grows in supply but has very little practical use other than as a rare store of value, and most of that is owned by governments which subjects its perceived value to gross manipulation. If one wants an alternative combination store of value AND an investment, why not consider some real items that have numerous practical uses? As an example, say fuel, food, strategic metals/minerals, etc., which have numerous applications and in a functionally expanding economy are daily used and used up, contrary do what the temporary (Keynesian?) Baltic Dry Index might indicate. Ultimately one needs to understand that paper is not money, regardless of how many try to persuade otherwise. It’s only value is derived from the confidence and faith placed in it by its collective users. Lately that faith is being grossly shattered and undermined by the circumstances of the financial thing we are now facing — re-depressive financial black-hole. It certainly exhibits very little in common with other recessions or depressions, and is an obviously traceable result of a combination of calculated deliberate actions by central banking allowing huge bubbles to go unchecked, and greed based immoral imbecility within corporate managements via ridiculous unregulated mega-stakes derivative credit-swap entanglements, and all now tainted with nonsensical political acquiescence and promulgated economic whiplash. The smoke and mirrors include the bailouts and stimulus programs which are both ingenious in terms of covering up causative elements and stupid in terms of the magnitude of future sacrifice involved. The whole event smacks of setting the stage for even bigger and uglier events to follow, world-wide. The markets have been suggesting for years that certain government induced manipulations are taking place which then requires one to look beyond the traditional charts and strictly navigate principled fundamentals. Eventually that is what will remain when the dust settles in the next 2-3 years. A very good case can be made that a world-wide currency re/de-valuation is shaping up which may need to be backed up in whole, or at least partially, by something other than faith and confidence as those are being completely shattered by current and future monetary interventions — maybe gold??. Perhaps a mutual fund type approach needs to be devised if it does not already exist, which would invest in a combination of “real” things, such as energy and alternative energy products and sources, gold and silver products and sources, food products and sources, as well as strategic metals and minerals products and sources, etc. While such is desirable, it would still need to be operated and controlled in such fashion as to exude complete honesty and integrity. Short of that, one is still stuck with trying to fend for themselves which means they have to of necessity now include security and protection into the equation. The recession is economic, financial, and monetary. The depression is moral, pure and simple and bespeaks of collective, mass distrust toward those who are in control whether they be self-directed central bankers or elected officials at all levels of government, or those hired and placed in positions of authority within banks and corporations, or even those who are supposedly overseeing all those actions via regulation, accountability and responsibility. Since the normal market cleansing processes have been effectively forestalled and/or derailed, an air of ultimate market confusion is beginning to snowball, the likes of which none of us now alive has ever experienced, even those who survive the Great Depression years. Eventually, when all of the contrived spending programs have mostly failed and all the bright ideas have been exhausted, a rebound of new morality and normality will begin to sprout, hopefully with hindsight clearly in vogue, to restore renewed hopes instead of vane hypes into both the societal and material machinations that keep us all from escaping ultimate reality or even worse, starting wars. I suggest being currently long silver and selective micro-caps. Was going to say penny stocks, but now that would include the likes of GM, Ford, Citi Group and other zombies, etc., many of which will be completely changed or dissolved before long. Gold will rise little by little, but silver will eventually be short of supply and will find numerous new applications. Physical silver such as 90 or 40 percent coins and pure bullion ingots for long term hold are good starters, as silver (AG) may one day match or exceed the value of gold (AU), and as AG already has or is now approaching peak supply vs demand. Geologically, the primary silver deposits ended up in the surface crust of the earth so other than now known deposits, it will begin to only show up as a by-product of other types of mining. Also consider well capitalized nano-tech, medical tech, entertainment, mining, energy and alternative energy, etc., many of which also consume or will consume lots of silver overall. Economically speaking, silver is so elastic that even though individual applications use very minute amounts, the overall consumption is high. This means that even if AG goes to $1000 or $10,000 per ounce, individual applications only increase by cents so they will continue, especially since the photography industry really no longer needs to gobble it up due to digital replacement. Since such micro applications occur, it is near impossible to recapture or recycle the substance except mostly in photographic use. Nano applications will use even less per application, but the characteristics of silver will be such that many new uses will soon be exposed especially in medical bacterial and viral disease prevention areas, water treatment and purification, electronics, solar and other alternative energy, and the list goes on and on and on. The gold/silver ratio is definitely out of whack and will close eventually to an unbelievable 1:1 or less within the next 10-15 years. The present dilemma not with standing, people need not adjust historically proven investment decisions on an economic aberration that will eventually blow over. If one is going to look at the long haul, one needs to be looking at charts that replicate 100-500 years which probably do not reliably exist. Keynesian economics are structured for the short term because he said in the long run we are all dead. Well, there goes the neighborhood. Let’s start thinking about future generations and then things will begin to fall into place as we begin to develop principles of integrity and frugality in place of immediate gratification for the “me” “now”. The second half recovery will likely happen in the sense of a strong bear market rally, at least until the next bubble bursts such at the treasury bond market or if large investors get cold feet and dump all the paper we have sold to them. As much as we all would like an easy way out of this mess, folly and stupidity dictate that we can not buy our way out of these kinds of problems, save normal market cleansing corrections. We have absolutely no business selling gobs of paper to other nations in order to supplement our own lack of productivity. This idiocy has stunted American ingenuity and technical development which might otherwise have solved
many of the problems we now face, and for which we now must play a fast game of catch-up if we intend to save this great nation. The answers are in our grasp if we would open our eyes and process the information. Naturally the Baltic Dry Index is going to reflect the economic aberration but even that is only temporary no matter how many years it has been tracked. Again it may be useful for day-traders or short term Keynesian folks, but do not use this information as a replacement for sound long-term fundamental thinking, or you will go the way of an out of control fire-cracker. Truth be known, much of the funds supposedly provided to banks for the purpose of renewed lending were simultaneously obligated back to the central bank making them technically part of the money supply but functionally unavailable. Now that the fit has begun to hit the proverbial shan, this will change somewhat but who in their right mind is going to want to borrow short of necessity to liquidate other debt? The underlying problem boils down to lack of confidence which neither the prior nor present administration or legislature or general public seem able to truly grasp. Restore confidence and all the other problems begin to evaporate. This can only occur when the markets are allowed to self-correct and when the foxes and wolves are removed from the hen-house. When people begin to see greedy self-serving predators removed from positions of authority, confidence will begin to return. Perhaps a new cleansing agency needs to be created to hunt down and reverse ridiculous prior golden parachutes — that could help pay for the stimulus programs. Short of that kind of moral suasion, we really cannot legislate morality. It needs to come from within and is nurtured by leadership example. It needs to start with each person who is lucky enough to be in charge of a position of responsibility. Technological development sufficient to spur quick and massive productivity is the only way out of this mess. We need to do more than pay mouthing to these problems — we need to develop, create, and process into out lifestyle the means of cheap cold-fusion energy from the automobile up to the national power grid. Small scale this unit could be installed at each and every demand source, be it a household, or a rail engine, an automobile, or a ship or a generator, or a spaceship, etc. It’s cheap and its out there if we so choose by the way. We need to precede every decision of production with the question of its disposition prior to a green light. If we are producing product X and it is going to be detrimental to the planet, we need to go the extra mile and explore the alternatives until we come up with an answer. Nuclear power while also cheap, does produce by-products with scary half-lives and is very expensive and relatively dangerous by comparative standards. Let’s wake up the American ingenuity and go to work. How’s all that for contrarian investment?

Louis,
You present a good case. Singling out the gold to silver ratio, I noticed that Monex Precious Metals showed the price of gold closing even on Friday, while silver gained $0.25, or almost 1.9%. Do you agree that the gold/silver ratio anomaly may to a large extent be due to the fact that silver is an industrial metal with substantially diminished demand during this recession? Is it not possible that we could be looking at a situation where gold is somewhat overbought and silver has been trading at excessively depressed prices. In other words, it is not necessarily a question of one or the other having to make up for the deficit, is it? Especially if you are correct when you say that “we’re close to the worst of times”.
Regardless, I’m now seriously considering selling in-the-money calls on my gold stocks.
John

Over the past 50 years, our standard of living (..for most of us..) has been increased and perpetuated by growth in our economies. The last few years have been a bonanza for growth beyond the norm.

When our parents occasionally cut our “monthly allowance” because we had been bad, our lifestyle didn’t change but we thought harder about where to invest what we did get.

Last year, our parents cut our allowance in half and took away one of our Wii games, –maybe for a long time. Some of us think things will return to normal soon. Others wonder if our parents are not only going cut our allowance more, start talking about moving to a smaller house, and possibly may make us give back some of what we accumulated in our piggybanks. Even though this makes us think much harder about what to do with our piggybanks and allowance, I think we’re still too comfortable to hedge (buy gold).

We can’t buy that new game for the Wii right now, but we still have a Wii. We’ll wait and see if things get worse and we have to move, then we’ll think about it again. Might have to hide the piggy bank a little farther back in the closet to hedge, but we’re not yet worried enough to go to the extra trouble. Some of the other kids will probably have to, but hopefully we won’t. We know things are going to change a lot, but our parents tell us everything is going to be alright, so we’ll go with that for now.

Reading comments over the 12 points for selling gold I think are very good valid points and I did sell some a few months ago just before it shot up again and I cant agree more when everyone wants something just think about oil bang then down it goes to make a few comments the oil ratio point I feel oil has overcorrected and a 100% gain is on the horrison as a correction in gold however I have a lot of gold and intend to hold it long term its nice insurance given the amount of black swans around and longterm I feel it will hold a fair value and if things do go belly up eg a UK or US credit default which is a possibility gold will shine I sleep better and have receintly added some silver in my portfolio last week for the reasons stated and polladium and platinum mining stock and added to china its all fun in truth nobody knows thats why spread it around a bit and I reccomend everyone keeps a little gold whatever the price for rainy days.
regards mark

I have heard that China has 600 tons of gold and
is planning to expand to 4000 tons. Any commment?
which country holds a lot of dollars? China?
Is China upset with the U.S.??

Only about 1% of U.S. citizens own gold—how about
if that goes to 2 or 3%?
Would we have shortages?
Have you called the U.S. or Canadian mint and tried
to buy gold—they are low and around the world we
hear about mines closing?

U.S. printing excessive amounts of money?
Stock market yet to hit a real bottom?

I am placing my bet on gold.

In 2001 we were below 300 dollars an oz on gold
Last year we had a low of 650 and a high of 1030.
This year we will have a higher low and a higher
high.
Sound analysts are saying gold this year over
2000.
I will place my bets with them.
Short term pullbacks, yes, but these equal long
term buying opportunities.
3 to 5 years or 10 years or more, long term hold
and store for wealth.
Yes, you can play short term just liking gambling in Vegas, but you will end up suffering some big losses,
I prefer the conservative route of long term hold of the physical metals———–been getting
richer and richer since 2001, how about you?
is your store of wealth in stocks and real estate,
only?
Did anyone own Indy Mac Bank stock that went from
over $48 per share to nothing or check out B of A,
is that stock at $6 or less?
all investments have their time, gold is in the
3rd of 4th inning, it ain’t over yet/////////////

It’s not difficult for me to figure a bubble top.

For example, the elderly secretary down the hall called the dot com top for me when she told me she had everything in and I should do the same.

When my next door neighbors stuck a house for sale by owner sign in their front yard and sold in a week at a profit, that told me the housing top was in.

So far, those types have not even given consideration to metals.
They are still counting on a speedy stock market recovery.

To be sure Cash4Gold is just a middleman, they refine the gold they buy and sell it to someone else. So it comes down to this — who is likely to be the smarter player, the guy buying the refined gold from Cash4Gold or the guy selling off his gold trinkets to Cash4Gold? We know this — the guy doing the buying was prudent enough to have some cash saved up to buy gold with. The guy selling off his class ring for $20 probably does not have his financial affairs in order. Looks to me like it’s the smart money that’s buying and the dumb money that’s selling.

Also, I disagree that there’s anything “contrarian” about shorting gold. I have a significant position in gold. No other member of my family does. Neither do any of my friends. Like most “gold bugs”, I’m still an odd bird, a social outcast, a geek. When the Oxford Club starts recommending gold bullion, *that* will be a contrarian indicator.

However, there are important cycle events due in February that may very well correct gold.

Feb 18th is the mean date for a 30 year commodity cycle low.
Feb 27th is the mean date for a 8 (96 month) year gold cycle.

Thanks for all the recommendations that are going to cross a good information

1. Now’s the time to short gold because right now “everyone is buying gold, or at least recommending it”.

Sorry, wrong again. Peter Brimelow just published a survey of brokerages and trading accounts that found that only 3% to 9% of all “investors” currently have a gold position.

And most of those are invested, not in physical gold, but in shares of GLD or some other gold-backed or gold-investment fund. What those people don’t know is that the streetTracks GLD gold ETF, unlike CEF or some others, does not say they are backed with physical gold, nor will they list gold positions, serial numbers, warehouse contracts or anything similar. The prospectus for GLD says it holds “gold investments” which can mean anything. State Street Bank is the listed operator of GLD but the real administrator is JPMorgan Chase, the king of bullion price manipulators. To me, that suggests that GLD shareholders are invested in paper futures contracts.

You can’t redeem shares of GLD for physical gold. It’s just a way to “play” gold price moves, and you own nothing but a digital share of a mythical gold inventory.

So, “everybody” isn’t invested in gold. Not even 10% of them. I doubt if 2% have bought physical gold.

3. “There is always some truth in a rumor. Recent news reports suggested Germany…was selling some from its vaults to trim its deficit.”

“There’s always some truth in a rumor”—pure BS. How many rumors can you think of that turned out to be absolutely baseless? Besides which, there was no such rumor. What there was, was the usual: The Bundestag (Diet) called up the Bundesbank and said, “Once again, please can we sell some of our gold reserves to close the budget gap?” and the Bundesbank replied, “Once again, go to hell. Selling gold reserves is not the way to manage a budget. Cut spending or raise taxes.” They do this every year, sometimes twice in a year. The Bundesbank remembers Weimar.

4. “The gold-to-oil ratio is out of whack…If you believe in statistics, a reversion to the mean is imminent!”

Yes, indeed. And the way that reversion is likely to occur is that oil rises back above $50 when oil traders remember that the supply/demand equation has two sides. Demand is slipping at the moment, and may continue to slide. But the IEA calculates that world oil production is fading fast and supply is projected to fall 7% next year. Hint: the IEA, like the EIA, tends to be overly conservative in their prophecies. And the IEA thinks that Mexico will be done exporting oil before the end of next year, while Canada can’t produce oil from bitumen at a profit until crude oil rises back towards $50. Tarsands projects are being closed because of sub-$40 oil.

5. “So is the gold-to-silver ratio…I’d rather place my bets on a 57% decrease in the price of gold, than silver more than doubling to make it happen.”

That’s hilarious! Almost everything he says there is wrong. If you count all monetary history, not just the last two centuries, the ratio is about 16 to 1, which just happens to be the way silver and gold are distributed in the earth’s crust. Gold is just 16 times rarer than silver, not 31 or 73. BTW, silver is now even higher than his figure. Just 69 ounces of silver will buy you an ounce of gold. He’d rather bet on gold falling to $400 than silver doubling. He probably said the same thing in 2003 when silver was $5, before it quadrupled. World annual mine production is 600,000 ounces of silver and falling, while world consumption is near a billion ounces, and silver is hard to get your hands on, unless you’re willing to pay a fierce premium to spot. He knows nothing about the fundamentals of either silver or gold.

6. “The HGNSI index is too high at 60.9%”

I’ve followed this one for years. It only reflects short-term sentiment, and has been wrong as often as it’s been right.

7. ” rising demand from investors…only offset half of the 33% decline in jewelry demand since 2001.”

That being the case, how does he explain that fact that in 2001 gold was $270 and is now over $900? If investment demand didn’t offset jewelry demand, what did?

8. What makes now “different?” How about the collapse of the world’s financial system? How about what the IMF has called a “global depression”? Why hasn’t gold tested last March’s high of $1,030.80 per ounce? How about desperate forced selling of every asset they hold by highly-leveraged trading banks, hedge funds and money managers to meet margin calls and redemptions? The “massive amounts of stimulus” are exactly the reason why gold is going much higher. Every wealthy person on the planet understands that paper money is nothing more a worthless promise from a bankrupt government.

10. “Hedge fund buying dried up. …In the end, gold prices will eventually reflect the absence of these former heavyweights.”

Hello? The hedge funds sold because they were going under. They’re out. Gold prices already reflect the hedge funds’ liquidated positions. In the meantime, the big commercials have closed out short positions right and left and most were long by year’s end.

11. The desire to protect your savings from ruinous currency debasement is a madman’s Wrong Personality? As for a “second half recovery”…Not even Paul Krugman or Martin Wolf will buy that pig. Second half of what? The 21st century?

12. Before the Baltic Dry Index gained 61%, it crashed 90%. In other words, it rallied from 10% to 16% of its high. Dry shipping is still in a depression.

This guy is either very ignorant, or something much worse. If you short gold now, don’t doze at the computer.

Thanks for the article and all the very thoughtful comments.

Sometimes anecdotes are interesting ways to look at markets. While purchasing some junk silver coins the other day I overheard the owner of the shop talking to his wholesaler who said “Do you have any gold - I need more gold”. You can take that either way - the market is peaking since physical demand is strong at the top or the buying is really serious and has a long way to go because people who never considered gold are now moving some assets into it.

I purchased silver for the same reason you recommend shorting gold - the ratio is out of line. It seems to me both silver and platinum are low versus gold. Of course, my market timing being what it is, gold is likely to drop $100 out of the blue!

Usually the precious metals peak out when gold is outperformed by silver - kind of like the Dow and NASDAQ. Silver should be pushing $50+ just to be keeping pace with gold - the gold/silver ratio bottomed out around 16 back in the 70’s - a long way from 65 today.

I saw a female money manager on CNBC who said “Gold is acting more like a currency than a commodity”. So you see, you never know where nuggets of wisdom will come from. All currencies including the mighty yen are falling in terms of gold. Perhaps, as Red Foxx used to say “This is the big one!”

Finally, if you just saved your silver pocket change from before 1964 your quarters for example would be worth $2.75, a compound growth rate of 5.5% over 45 years. Not brilliant, exciting, market beating etc. but not bad either - I would imagine close to short term bank deposits. It just goes to show what has really happened with money coined by the United States, not Zimbabwe. A quarter today is worth less than 10% of the same quarter minted in 1964 of 90% silver. Precious metals are stores of value and will continue to be. Fiat currencies are Monopoly money. Trade parts of your holdings if you wish - some people are really good at that sort of thing, but keep a goodly amount permanently, “just in case”.

Short term I agree the Gold would go down as - you want to accept it or not the rally in Gold always coincides with the marraige season in India, this season would last for about a month more and then the correction would be expected. Long term I agree with all these guys that Gold has to go up with all the treasuries around the world printing currencies, the average investor is not going to look at either the stocks nor the real estate for some time to invest in. The average investor is definitely investing in Gold for long term with all and sundry talking about depression hitting the world in next few years.

Germany is ready to kick out NATO and build the EU army, they are not going to sell gold and pay paper debts back while the USA is running out of ink to print it’s doomed currency.

The same thing can be said about the Islamic world they are massing large volumes of Euro’s and storing wealth in Gold bullions.

This economic cycle will change the history of world power and I will promise you one thing GOLD WILL NOT BE MEASURED IN US DOLLARS BY 2012.

in the Great Depression, people lost confidence in the banks; now the banks have lost confidence in the people. This could be worse.

( ie. not lending )

Please read this:
http://informationclearinghouse.info/article22000.htm
This kind of crisis gonna be a different one, an unprecedented one, which is strongly related to the end of the capitalism as it has been kown.

The US dollar will self destruct in time, but gold will not. That’s why gold is sought by people, worldwide, trying to preserve a little of their assets for the future. There simply is not enough gold to go around; and that is what will inflate its price out of all reason. Only a fool would be shorting gold today.

Show us your short contract notes, and then we will know you are actually fair dinkum!!!

Margin Call…..Gentlemen!

I have30 + years experience in the bullion industry, and that said, I wish this guy lots of luck.

He was probably stopped out in the last day or 2.
What is most annoying about this article is the reasoning:

Reason 1: Contrarians profit also. I have traded many time against the grain. You win, and you lose. The object of the game is to win more.

Reason 2 is ridiculous. I have been seeing infomercials about gold in the wee hours of the AM, since it was trading 450 an ounce.

Reason 3: I was never aware that Germany was the number 2 holder of gold.
http://en.wikipedia.org/wiki/Official_gold_reserves

I would have guessed that IMF would be number 2 followed by Switzerland. You learn something new every day. There is certainly a very reasonable possibility that there will be central bank selling of gold to raise capital, but there is an equally reasonable possibility that they wont sell, they will lease. They have done this in the past, and it does create an “artificial weakness in the price”

Reason 4: This ratio could correct itself obviously a couple of ways. Oil could rally again to a point where the ratio comes back in. Or gold of course could drop, or both could move to a point where the ratio returns to the historic uniformity he is talking about. We could also be in a new era where the ratio has become meaningless.

Reason 5: Same as reason 4

Reason 6: Not sure will have to study the HGNSI

Reason 12: The recession will end by Second half of 2009? Bottom line here, If a politician says something to this affect, I assume its a lie. History has now clearly proven that the bastards lie, and have no problem whatsoever doing it.

e.g Ben Bernanke and H. Paulson testifying before congress April 2008, that there was no way we would see recession. that the banking industry was sound. Go ahead, trust your government…fully. They do indeed have the publics best interest at heart. NOT.

Mr Basenese, hasn’t considered at all that this economic crisis that is still unfolding before us, has changed the game? even in the medium term?

Good luck with your shorts buddy. You haven t convinced me.

There will come a time when AU hits a top, but that time hasn’t come yet.

My advice: If your long and have a nice profit, perhaps take some profit and let the balance ride.

As far as shorting this, the suggestion is ludicrous at best. from a trading and fundamental standpoint.

Tom! You can drink Goldschlager, but the point he’s trying to make is that gold will preserver your purchasing power, even when a loaf of bread costs $4Bn or 4Bn Reichsmark. Government cannot effectively tax people and therefore confiscate through inflation. There will always be someone who will part their bread for gold, it’s the ultimate form of payment…

Sandra, My bad. I am sorry.

My point is that jewery demand has very VERY little to do with the price of gold. Gold is a currency and nothing else. If you look in history, when gold went from 35 to 800 and back to 250 in 2001, did that happen due to jewelry demand or b/c the need for monetaty protection in tim of currnecy distress?

GLTA

What would have been the consequences if the newly printed stimulus package funds were used to buy GOLD! and sold later in the year @ $3500 an ounce or more ! Or used to finally back the Greenback ala Pres. Jackson- in the 1800’s Greenbacks backed by gold- Print all the money you want and buy up all the gold you can- how does this help our economy? Gov gets out of debt; no more interest loan payments- a new monetary system backed by gold - this was a dream last night

i prefer short gold @1033 for short term for longterm i will hold

OK Louis, we know that you are a gold hater as I haven’t read one of your articles that promoted that gold would rise. Their all about the downturns that gold experiences. I’m not too concerned about the short term gyrations [even up to $100 decline] in the gold price as long as the long term trend is up. How about predicting the downturn that breaks the gold bull market? Have a go at that.

You may have predicted the $USD turning or bonds declining but you have missed all the big moves in the gold price due to your anti-gold stance. I tend to think that is due to your biased focus on negative technicals not fundamentals. If you did focus on the fundamentals you would have seen the beginning of the gold bull market back in 2001 and all its bullish moves since then. You would have seen the housing bubble and all its ramifications and you would have definately seen the financial crisis that it has caused and chaos that has ensured in the paper markets.

Listen to this: you may be someone who would rather have a loaf of bread than a nugget of gold but how do you intend to obtain that loaf of bread? The answer is to trade it with the gold nuggets in your possession. Also consider that when the world reaches a stage when that scenario becomes reality I am absolutely sure that if paper currencies still exist then they would be backed with gold not the dying world of worthless leveraged derivative products.

Hello, I’d like to know more about the cycles that you are referring to. Please tell us where you are getting this information.
Thanks in advance, Todd.

Interesting comments Sir, you must have been around a long time, and must have a Military background under your belt.

This is probably all irrelevant:
I for one know from life that a person can’t eat gold or bullets, but beans we can eat, so that’s a good thing. I hadn’t heard of folks eating rats, but a person will eat whatever they have to in-order to survive.
I’ve lived here in the south-west nearly all of my life and I’ve yet to see any bean of any type in relation to the Anasazi. There is primarily corn though, and it’s not the big ears of corn that we see today, it is small cobs about 3-6″ long.

later…….

Max,

As I have been reading through this thread - you have said it all, good for you. Max. wrote, “Just watch gold hold its value while world currencies die a painful death over the next few years.”

I really think there is hope for Louis - especially after he witnesses how wrong he is. The US dollar will turn into the valve of confetti because of all the inflation created by the central bank. Remember inflation is a function of money supply - that is inseparable to asset appreciation. Food for thought!

utterly the worst article on gold I have ever read (which is saying something, since I’ve read some on seeking alpha), all the points are easily refuted, but why waste time on this trash.

The chip on your shoulder is showing on all of your posts.

You would do well if you spent 38.2% of your (intellectual) retracement on your trades instead of your bitter and twisted snappy retorts. You don’t get any points by getting personal with people.

There are ways to communicate your opinions without being insulting. Attacking people is damaging to your image, and not productive in the final outcome.

H

the Trend is your Friend. And the trend is up. Short term, medium term, long term.
end of story

You forgot contrarian point number 13: The comment section of your article will be filled with GoldTards trying to convince you, them, everyone that Gold and Silver can not collapse in a deflationary debt contraction. Let the Duck Dinner Shearing Begin!!

LOUIS
ONE OF THESE DAYS I WILL MEET YOU LIVE,AM A LIFETIMECHAIRMANS MEMBER……………..

HOW CONFUSING CAN A GUY GET.
YOU SAY SHORT GOLD AND EVERYONE SAYS BUY AND HOLD ON FOR DEAR LIFE FOR THE END IS NEAR IN CURRENCY.
CAN SEE WHEN/IF GOLD GOES INTO ORBIT TO 1300 AND UP RANGE A SHORT WILL LOOK GOOD………….
OH YEA….I LOST ALL MY MONEY…ALL OF IT DUE TO AN OXFORD RECOMMENDATION…I HAVE TO GO BACK TO WORK NOW…THE PROVERB DON T LOAD THE COOKIE JAR ..WELL I DID AND LOST…………………..
I AM FED UP WITH THE HEADLINES IN THE NEWS…AND THEN AGAIN I HAVE A SON JUST ABOUT TO BEGIN A 7TH TOUR TO DEFEND THE GOOD OLE USA ..FOR WHAT???
THE ONLY GOOD LAWYER I KNOW…..IS THE ONE YOU DON T USE…EVEN OUR JUSTICE SYSTEM IS STACKED IN FAVOR OF THE PERPETRATOR AND THE VICTIM LEFT TO OWN SELF…….WHAT AM I GETTING AT.
MAYBE I READ TOO MUCH ….TOO MUCH OF ANYTHING CAN BE BAD RIGHT.
BUT MY LIFE CHANGED 4 YEARS AGO WHEN I WOKE UP AND LOST IT ALL ON A REASTATE REIT WHEN REASTATE WAS AT PEAK..GO FIGURE…OH YEA, THE GOVERNMENT PUT AN END TO THAT ALSO……
GOD BLESSED ME WITH MENTAL AND PHYSICAL STABILITY
SO HI HO HI HO IFS OFF TO WORK I GO.
IF I JUST WOULD HAVE KEPT MY $$ IN THE BANKS…..
JUST KEPT MONEY AND COMPOUNDED AT LITTLE INTEREST RATES..I WOULD NT HAVE THE HEADACHE I FACE TODAY..STILL HAVE 2 DAUGHTERS AT HOME.
NEVER HAVE I EVER AS IN EVER READ…SOMEONE STATING..KEEP IT IN SAVINGS AT THE BANK…..
WISHING YOU GOOD TIDINGS AND WATCHING YOUR WHITE CAP REPORT……I NEED A LITTLE SOME GOOD TO HAPPEN SOON.
PAT

Ker,

How many of your friends own gold?…My bet is very few… How can gold be at a top when most people don’t have the slightest idea of how, where and what to buy….

Well said. Gold has been the wealth-of-last-resort for over 5000 years. History is on it’s side. Paper with pretty pictures on it just doesn’t cut it.

All the gold held in US reserves (Fort knox and NY) only adds up to $250 billion. It’ll be gone in a flash when America needs to borrow more, and no-one will accept the crummy paper that bonds are written on.

Gold has been in a bull market for 8 years running. If this were GE or MSFT everyone would be falling over themselves to upgrade and buy into it. Fact is everyone HATES gold and none of my friends buy into it. When I read the article I immediately DOUBLED DOWN on gold miners. He is SO wrong.

Gold could conceivably crash all the way down to as low as $300 / oz. (I’m pretty damn sure I’ll never see $260 again in my lifetime.) But that’s about it. It won’t lose 90% of its value like so many banks and imprudent auto companies. Bank of America crashed down to happy meal prices because it had so many liabilities overwhelming its assets. Gold is an asset with no liabilities.

My best short term guess — gold will correct down to the low $900s to high $800s — but end the year up at $1100 or more. Everything my government does is good for the gold price.

If the IMF and Germany do finally decide to dump hundreds of tonnes of gold into the market it will finally give the Chinese the chance they need to take a position. It will all be a wash.

My company’s health insurance just went up another 18%. So cry me a river about deflation.

Gold WILL continue to go up for many of the reasons listed by the posters here plus one more. If you count how many responses are long on gold in this column verses how many agree with Louis on shorting gold, the demand is huge for gold to go up. You may want to look at this column as a poll.

Lets put it this way - Louis upto what rate you willing to short ..??

Great Post, I am starting to be bearish on gold as well.

One thing about infomercials that I find interesting is that the commercials on TV are telling the public to sell not buy gold. The exact opposite of what you would expect at a top.

I think Gold will crash, however it is still to early to take on a position.

Lou,

As you predict in the first paragraph, many who replied to your article are crying foul and spewing venom.

This alone proves to me you are correct on this prediction. Reminds me of the brave few analysts who warned of a real estate crash in ‘05 and ‘06.
They were written off as doomsayers and whackjobs at the time as well. I’m surprised at some of the
harsh personal attacks on your judgement.

Maybe the truth your telling has stuck a nerve…?

Todd,
Don’t ever doubt we had to eat rats. Called the Hoover hogs, like I said.
Now, check out Germany post WWI. Inflation reached wheelbarrow for bread proportions, and the govt went on a barley and bean standard. That’s a fact.
As for the Anasasi, it is of course conjecture, but a small urn of beans was found in kiva, and a enough of those 10,000 year old beans sprouted to produce what is now a bean product available in many stores: Anasazin beans.

I too will be shorting gold soon. See it going to about 750 or 700 an oz and staying their because of its reliability.

Few other thoughts:

I have to seperate cash4gold from sophisticated investing. Someone was smart enough to think of and implement a scam at a time when people need money and are resorting to pawning (or are too proud for pawn shops) to pay bills. Gold could be at $95 an oz and that scam would have still had a nice run. Just maybe not quite as profitable.

I too was a big buyer of gold and shorting the S&P a year ago and telling everyone that Rome didnt last forever. The truth is in this global economy nobody really (other than fringe societies) wants there to be a lack of faith in paper or capitalism. Capitalism is a successful system which in its infancy got way out of hand due to greed and deceit. I believe Obama will restore faith in something positive. Most fear will dissipate, we will have better international reputation and policy, and some of the flaws of capatalism will be addressed. A relatively lower standard of living but no recession, depression, or WWIII. Faith will be restored in the markets and gold will retreat to its appropriate level. That’s my 3-8 year prediction but still see plenty of opportunity to take advantage of the cleansing of the capitalism bubble by shorting the right plays.

My question is: what is the best way (most profitable) to short gold. ETF, future market, etc.

I’m looking forward to making short term profits on our instability (obviously I would have preferred to take my 10% a year, but a societal correction was badly needed), a lot of people not being able to believe that a president could be so successful at such a young age (what a way to usher in a new era), and some of you jumping back into the markets so aggressively that you could take the Citi I just picked up for a nice ride.

As a short term technical play, sure it’s a fair bet to short gold right after it’s run up to (nearly) match its all time peak. After all, nothing goes up in a straight line, and gold certainly doesn’t. As I write gold is back down to about $950, and I suspect it will hit $900 again before it revisits $1000.

But as a long term play you won’t find me shorting gold. I first bought gold earlier in the decade when it was one third the price it is now. I bet Louis Basenese was telling people not to buy then, too. I bought it because I saw our half trillion dollar federal deficit and half trillion dollar trade deficit and figured it was going to end badly, so far as the dollar is concerned. Have any of those problems been fixed? Okay, the trade deficit is down from the $700 billion a year level, but only because we’re in a recession and not buying much, not because we’re suddenly making stuff that foreigners want to buy. Meanwhile the federal deficit is at $2 trillion a year, and we have a President who wants to make government bigger. I have more reasons to hold gold now than ever.

Lastly,

If our society “crumbles” and we default treasuries…there’s no gasoline at gas stations, people taking up arms, China and Russia getting close and the only option left is nuclear war I wish you all luck on getting your gold out of your safety deposit boxes and walking safely to a commodities exchange in South America, catching a first class flight to Zurich, or getting a customer service agent on the line at your insurance company regarding your missing bullion.

I was skeptical at first but having gone against Lou twice before and lost I sold my gold at 980 and silver at 13.70 and went short two days ago. Thanks Lou, you again seem to be on track.