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The Latest Evidence Higher Highs Are Ahead for GoldBy
Tuesday, December 7, 2010
"Gold has no use," a fellow speaker told the crowd Thursday night. "Our firm doesn't recommend gold. It has no industrial use. We can't value it."
I laughed to myself...
We were at a meeting for about 100 local businesspeople. And while the asset manager talked about how useless gold is, I thought, My readers haven't worried about gold's industrial uses... They've simply pocketed hundreds of percent profits. I've been telling my readers to buy gold since 2002. I've gotten them into gold coins and gold stocks – including my biggest winner, Seabridge Gold (for a 995% gain).
This asset manager on the stage has probably told his customers "gold has no industrial use" for a decade. He probably told them to buy and hold stocks instead. In that decade, gold has soared from $300 an ounce to $1,400. Meanwhile, stocks have lost money.
There was one other speaker there... He was from a mainstream bank. And he agreed with the other guy. He added, "Our firm recommends you have up to 8% of your financial assets in alternative assets, including hedge funds and commodities."
Then this speaker proudly explained how he talks his customers out of gold...
"Whenever a customer expresses an interest in gold, we try to figure out why... Because there are much better things you can own in every case. If they're afraid of inflation, for example, I show them that stocks do better than gold in inflation."
I just kept my mouth shut.
If these guys have had their heads in the sand for 10 years, nothing I could say would change that.
Look, I know the bear case for gold. I know it doesn't pay dividends or grow like a company. I know it doesn't pay interest like a government bond. I know it's not useful for industry. And I know it's more cumbersome than a debit card when you just want to buy a gallon of milk. I know it's not a true inflation hedge. I know, I know, I know.
But one more thing became clear to me after hearing these "mainstream" asset managers...
Gold is still a "fringe" asset. Clearly, it makes bankers cringe. Not only do they not recommend it, they talk their customers out of it.
I didn't realize mainstream bankers and asset managers still had such a distaste for gold. To me, this means gold still has plenty of room to run.
Gold can certainly have a severe correction from here. But "big money" investors (and governments like China and India) now view gold as another form of currency – a store of value. That means the sky is the limit for the price of gold, whether it has any industrial use or not!
Is the price of gold at "nosebleed" heights? Yes, based on history.
But if gold is now being thought of as the new alternative currency, it could still go much higher. And as long as mainstream bankers hold it with such disdain, it can keep going up.
Don't sell your gold at these prices... The mainstream still doesn't own gold. Astoundingly, it's still not "popular" yet.
So sit tight... Corrections will surely happen. While the price of gold might seem high today, there are higher highs ahead.
Good investing,
Further Reading:
"Your assets might not be as safe as you think," Steve writes. "Our government is deeper in debt than ever. And the U.S. dollar is bound to lose value as our government is left paying its debts through the printing press." Your best protection is to hold precious metals offshore. Find an easy, safe way anyone can do that here: Simple Asset Protection Secrets from Switzerland.
DailyWealth readers had plenty of time to get in on Seabridge Gold's huge run higher. Here's one of Steve's early writeups, with details on the company's incredible story: Seabridge Gold: One Great Stock Idea.
Market NotesTHIS COMMODITY SECTOR IS EXPLODING The "bad to less bad" gains in uranium stocks are getting ridiculous. And once again, we turn your attention to premier uranium play Denison Mines (DNN) for a picture of what's happening...
Back in July, we presented a chart of Uranium Participation Corp and noted how the brutal bear market in uranium was ending. In November, we updated you how the bull market was beginning... and how premier name Denison Mines was surging as the sector went from "bad to less bad." The stock climbed around 100% in just two months.
As you can see from today's chart, the "bad to less bad" gains keep coming for Denison. The stock has "gone parabolic" to climb 28% in the last three weeks. The charts of Denison's uranium-sector cousins look just the same. And as colleague Chris Mayer noted in Saturday's essay, this bull market has plenty of room to run...
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