Gold: Best Days Still Ahead

Often, when I suggest adding gold to a client's portfolio, they will complain that the price is "too high" and that they should have bought it back when it was "low."

I try to explain to them that there is a difference between "low" and "lower."

Ten years ago, when gold was at $350 an ounce, it was certainly "lower" than it is today. But does that imply that prices today are "high," or simply "higher?"

I submit that prices are not "high," only "higher." Said another way, in the grand scheme of things, prices are still "low." Here's why.


The following is an article from Rick Ackerman regarding the lack of frenzy surrounding gold right now. When the public discovers gold and it is the talk of cocktail parties, and the price goes through the roof, THEN it will be "high." Read the article and I will continue afterwards.



NYC Gold Expo Blissfully Subdued
by Rick Ackerman on May 13, 2009 12:01 am

The scene at the Hard Assets Investment Conference in New York City looks pretty subdued this year — an encouraging sign, since it will be time to exit precious metals when this annual event reaches the frothy stage. For now, though, frothy it is not. I’m told that there are only half as many exhibitors this year as last, continuing a pattern of decline that began a couple of years ago (when, need I remind you, gold quotes were nearly 40 percent lower). Mining and energy companies with booths at the show were oh-so-eager to chat up anyone who walked by, and at times there were more company reps in the aisles than there were visitors. I don’t mean to suggest that this event was a dud – only that it reflects the bland consensus on bullion that obtains outside of hard-money circles.

Let me repeat myself: This is quite bullish, to the extent that multitudes of investors yet to be persuaded and who stayed away in droves represent potential demand for nuggets yet to be mined and ingots to be fabricated. I should also say that the conference itself, at the Marriott Marquis, was first-rate in all of its details. The line-up of speakers represents a who’s who of the precious metals world, as well as newsmakers from other walks of life. Harry Markopolos, the guy who tried so hard to rat out Bernie Madoff to the SEC, gave the “Insider’s Story.” Jay Taylor, the expert’s expert on mining shares, shared his considerable expertise. And Bob Prechter delivered Monday’s keynote: “Using the Wave Principle to Forecast Gold and Silver Prices”. Peter Schiff spoke on the collapse of the U.S. bubble economy and what it means for investors, and Amity Shlaes, author of a superb new book about the Great Depression, shed light on the government’s efforts to repair the financial crisis.

HUI Near a Breakout

There were also presentations by companies both big and small from the world of mining, energy and natural resources, including some favorites of ours such as Pelangio Exploration and Esperanza. Ironically, while speakers from these companies were working hard to convince the audience that now is the time for hard-asset investors to go all-in, the Gold Bugs Index (HUI) was stealing up on a technical threshold that some chartists might view as breakout territory. Mining-share aficionados should be smacking their lips over the fact that this could happen so quietly. We can’t say exactly when the mining sector is going to blast off for outer space, but there is no mistaking the evidence that they are fixing to do so. Let’s hope that when it finally happens, few take notice.





Investors are very familiar with the Bell Curve. It represents the rise and fall of trends, cycles and/or investments. Everything in life goes through cycles, and investments are no different.

Here is a Bell Curve for a hot technology fund back in the late 90's when everyone was invested in internet and technology stocks and mutual funds.




The share price of the fund in the late 80s was about $4. By the mid 90s it had tripled to $12.

"Too high to get in now, you would have said."

Wrong. Look what you would have missed. Another tripling of your money!

Notice how it gradually went up and then when everyone got on the bandwagon in 1998 and 1999, it went ballistic. All you heard on TV, cocktail parties and family reunions was how much money everyone was making in tech stocks.

THAT'S the time to get out.....when it looks like the sky is the limit.

Sure enough, as the tech boom illustrated, prices dropped off the cliff shortly thereafter.

Well, here we are with gold prices up three-fold in the last 10 years, AND NOBODY IS NOTICING! Which is good for us buyers, because the longer the buying pressure is suppressed, once it is let go, gold will go ballistic.

I recently heard a statistic that said if gold were backing our money as it was in the 20's, based on the amount of paper money out there, gold would be at $25,000 per ounce right now.

That day is coming. It is inevitable as the Asians and Arabs have already started dumping dollars for gold. When this cat gets out of the bag, and the public finally understands what is going on, I don't think $25,000 is out of the realm of possibility.

So. You tell me. Is gold high?