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$500 Gold? It’s a Bargain

By Dr. Steve Sjuggerud
Monday, November 21, 2005

When even Bill Bonner isn’t willing to pony up the current price for gold, you know it’s hated...

At DailyWealth, we buy hated assets in an uptrend. Gold qualifies.

Bill Bonner, if you don’t know, is the editor of The Daily Reckoning (, and co-author of the current bestseller “Empire of Debt.”

“ What’s the best investment strategy right now? Sell inflated property; buy gold,” he says in his latest missive. It’s a core theme of his latest book, and his preferred long-term strategy.

But talk about hated... even Bill is not buying gold now.

In the same article, with gold near $480, Bill says, “Right now, we rather regret it. Because gold has, so far, been unwilling to correct to our current buying target: $450. This leaves us to wonder whether we should buy at the market price - whatever it is - or continue waiting.”

Bill... stop wondering... Buy. Gold is cheap.

Adjusted for inflation, gold today is at the same price it was 30 years ago. Gold peaked at above $1,400 an ounce in 1980, adjusted for inflation. So we’re two-thirds below the price twenty-five years ago.

Bill, you’re quibbling over 6% here. When gold’s at $500...or $600... you’ll wish you hadn’t.

Look, there isn’t much value to be found around the world right now. Stocks aren’t particularly cheap, real estate is getting ridiculous in most places, and you sure won’t get rich in bonds. When things are like this, gold looks better and better as a safe store of wealth.

We’re in a bull market in gold. It’s a secular bull market, which is just a fancy way of saying the general uptrend will stay in place for many years. And we’re only near the beginning.

Let’s briefly compare the bull market in gold to the bull market in real estate, so we can see where we are...

Real estate started doing well when the stock market starting falling apart in 2000. But in 2001 and 2002, stocks were still all over the headlines. Nobody cared about real estate. The bull market in real estate started quietly back then, as bull markets always do.

Now in 2005, real estate is all over the covers of magazines... Moneymagazine, Forbes, Fortune, the Economist, BusinessWeek, you name it. It’s a classic sign the big “up” move in real estate is over.

Real estate’s also the talk of the cocktail parties. Here on our island in Florida, even the plumbers and the high school basketball coaches are getting into real estate. Why? They really believe they can’t go wrong.

Now consider gold... Have you ever talked gold coins at a cocktail party? How would people react if you did?

How about the mainstream business magazine covers? Gold hasn’t graced a single one.

Gold’s not at the cocktail parties or on the magazine covers. These are clear and simple signs that the gold bull market is in its very early stages.

Bill, clear out your $450 buy-up-to price. Consider changing it to “buy up to $600” instead. We’re only getting started here.

For now, don’t quibble. Just buy. You don’t get many big trends to ride in your lifetime. This is one. Get in, and stay in.

It will be simple to know when to get out of gold. Once you start hearing “you can’t go wrong in gold” at cocktail parties and see “How To Get Rich in Gold!” on the mainstream magazine covers, then it’s time to start liquidating your position.

We’re a long way from that now, so just buy and sit tight!

Good investing,


Market Notes


Last week, the U.S. Dollar continued its 2005 rebound, romping to 27-month highs versus the Japanese yen, 24-month highs versus the British pound and 25-month highs against the euro.


While the dollar rose against international currencies, gold was rising against the dollar – hitting a new 18-year high on Friday at $489.50.

Remember Steve’s True Wealth theme for 2005, “The Buck Stops Here?”

“No one believes it could happen,” he wrote in December 2004, “but in 2005, I expect to see both gold AND the dollar going up at the same time.”

What a brave call.


Stocks around the world over also made record highs last week:

Here in the U.S., the Nasdaq hit its highest level since June 2001…

In the U.K., the index of Britain’s largest 100 stocks, the FTSE 100, made a four-year high. German stocks, as measured by the Dax index, hit a three-and-a-half year high.

In Japan, the benchmark Nikkei 225 touched 14,633.35, a level not seen since Junichiro Koizumi became prime minister in April 2001.


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