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Friday, February 20, 2009

Gold hits $1000 signalling a lack of confidence in paper currencies

Craig Smith, CEO of Swiss America and author of “Rediscovering Gold in the 21st Century,” thinks gold will surpass today’s price of $1000 as investors lose confidence in fiat money.

"$1,000 an ounce gold signals the world has lost confidence in paper currencies, the federal government and Wall Street. The commodity super-cycle has swept gold prices to triple since 2001 -- but that's just the kickoff phase," says Mr. Smith.

Smith says gold will rise to $1,200 by the end of this year and around $2,300 in the next few years.

"Gold traditionally does well when people's confidence is waning," Smith says. "They know if they can hold an ounce of gold in their hands that Bernie Madoff is not going to run off with it!"

Madoff may not run off with your gold, but the US federal government might.  In 1933, U.S. President Franklin Roosevelt sign the Gold Confiscation Order "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates." One has to wonder why, if gold is a “barbarous relic” as John Maynard Keynes famously said, the state would find it necessary to prohibit its ownership?

A statement from Smith’s public relations firm may contain the answer to this question:

The era of paper currencies and complicated structured investments is giving way to a new era of tangible assets. Gold is emerging as a preferred asset class in a world drowning in debt. Gold serves the public as a true barometer of public confidence worldwide.

Western Standard readers will know that I subscribe to this view and have written about it here and here. My investment focus these days is farm land, which has been called “gold with a yield.”

Posted by Matthew Johnston

Posted by westernstandard on February 20, 2009 | Permalink


Big deal. The price of gold jumps up a few bucks.

It will flutter about. Always has.

Short term kneejerk reactions to minor movements in price lead to emotional based investing and only exacerbates volatility but does not always reward you in the medium term.

Posted by: epsilon | 2009-02-20 3:00:07 PM

You hang on to those GICs, Epsi. :-)

Posted by: Matthew Johnston | 2009-02-20 3:24:12 PM

Gold does not pay me to wait and is too volatile.

Good quality corporate debt is the way to go. I have been trading out equity for debt in some of my holdings. Debtholders get paid before equity holders and some of the yields are great. PLus I get paid to wait. I am also looking at preferred shares for the same reason.

I have always held 30% cash in my portfolio. At some point I will be purchasing monthly blocks of quality equities once the market has just passed bottom and reducing my cash holdings to 10 to 15%. I do not forsee doing that until mid 2010 at the earliest.

We are in for a long, brutal depression. I actually see a lot of good in it. I want to see poorly run companies and companies at the end of their life cycle get put out of business. Out of the ashes will arise new and better products, technologies and companies.

These companies will have products and technologies that are cleaner, safer, and are what the new generation of consumers and investors want.


Posted by: epsilon | 2009-02-20 5:21:32 PM

You sound like you've been listening to Kevin O'Leary.

Posted by: Matthew Johnston | 2009-02-20 5:40:52 PM

I like GICs when they pay 15%. They were in vogue when my mortgage was effectively 23%. That was in the early 80s. In my situation at that time, paying the mortgage was the first priority. Few dollars were available to buy GICs. I sold my house at that time, allowing the buyer to pay me 15% on the remaining balance. In about eight months he was able to pay me in full because mortgage rates at banks had finally come down. This was before "global economy". The ups and downs in the market were pretty scary then, but nothing compared to the wild excursions the global economy will bring. Hold onto your job. Any job. Jobs are important. They are the means by which people survive and money gets distributed. Don't ever let socialists use tax dollars to distribute the wealth of the nation. The more they distribute the worse the economy gets.

Posted by: dewp | 2009-02-20 10:54:37 PM

GATA (Gold Anti-Trust Action Committee) has been following this story for some time now. The true price of gold has been suppressed as a result of banks leasing it out to help buoy the flailing American dollar.

I heard Bill Murphy speak a couple of times. 2 years ago he predicted that gold would be between $1,000 and $1,200 per ounce by this time. He makes a very strong case for how this commodity has been manipulated and a compelling case why one should be buying gold. (We shouldn't have ever moved away from the gold standard in the first place.!)

I recommend you visit www.gata.org to learn more - in the meantime - I'll be buying gold!

Posted by: libertybelle | 2009-02-21 9:11:52 AM

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