Gold: Look Past Short Term Declines

The following is an excerpt from The Final Market Bubble

Gold, traditionally a good inflation hedge, will retain its value as the major fiat currencies collapse. However, I believe there will be a chance for us to go into gold at an entry point cheaper than now, during the early stage of the economic recovery, and before inflation truly appears. When that happens, I recommend moving a sizable portion of our net worth into gold, but not so much that we would miss out on a benign recovery if the Armageddon thesis turns out to be false.

There will likely be a short-lived, but voracious, stock market rally when signs of economic recovery first appear, and we should use that opportunity to off-load certain names in our stock portfolio.


Instead of trying to get the timing exactly right, let there be humility as the aforementioned strategy is implemented, in that it should be implemented in a piece-meal fashion. I would sell a little bit of the positions that don't fit the overall strategy at each major rally of equities, and I would add a little bit to gold at each correction of the metal.

Getting back to gold, the instrument a lot of retail investors will be using for their gold investment will be the SPDR Gold ETF (GLD), because that is the simplest way one can invest in gold through regular brokerage accounts. However, I recommend that we purchase some physical gold coins or bars as well when the prices go down a bit. Ultimately, the rationale for buying gold is the same as that of the people who are stocking up on guns, ammo, and water: "just-in-case".

In the "just-in-case" scenario, which is the complete annihilation of the existing financial system, the fund company that offered the Gold ETF may not survive, and the banks where we opened our brokerage accounts may cease to exist. To fully hedge against this possibility, we will all need a little bit of physical gold, stored in several different undisclosed locations that are known to be safe.