Why you Should Acquire Gold 

  
       Due to its relative scarcity, beauty, and enduring value gold has been prized by individual investors and bankers throughout history.  And it is important to point out that the central banks of the world have significant gold reserves today, but not for the purpose of backing their fiat currencies.  According to the World Gold Council, the central banks claim that they have approximately 32,000 metric tons.  But according to the Gold Anti-Trust Action Committee (www.gata.org), the actual figures are closer to 18,000 metric tons.  And why is this?  The answer is simple.  With so much gold collecting dust and not serving any legitimate purpose, central bankers have invented a deceptive practice to support their industry. 

      In a process known as “gold leasing” (lending/borrowing), the bankers transfer a portion of their gold assets to private bullion banks which pay the banks a positive interest rate (usually 1-2%) and then this gold is dumped on the open market.  This carry trade allows central banks to report the gold in their inventories while also creating a derivatives short position among the bullion banks.  And why is this information important?  This activity reveals a coordinated attempt to suppress the price of gold while maintaining consumer confidence in central bank policies.  In other words, it is a conspiracy to manipulate the gold market.   

      The fact that gold has risen from $250 in 2001 to $950 in recent days is evidence that the jig is up.  Central banks have lost the ability to lease at their critical margins and we are now on the threshold of a massive bull market in precious metals.  Is this mere speculation?  Hardly.  Consider these comments.  Doug Casey, editor of The International Speculator, says, “Gold is headed for $1,500 an ounce, probably much higher.”  In a recent article in Forbes Magazine, Leigh Goering, portfolio manager for Prudential Securities, predicts "...gold could attain $2,500 an ounce.”  Steve Puetz, famed editor of The Steve Puetz Letter, reports that “Gold will go to $5,000 during a currency meltdown, contraction, and crash.”  Industry experts also agree with this figure, and Pierre Lassondre, president of Newmont Mining, has suggested $6,500 or more. 

      Richard Russell, editor of the Dow Theory Letters since 1958, has commented, “In view of the amount of Fed-generated fiat paper that will have to be churned out in coming years (it will be in the multi-trillions of dollars), gold is the cheapest thing around.”  James Turk, publisher of the Free Market Gold and Money Report (www.fgmr.org), also makes this interesting observation when gold was $35 in 1971 and trading at $350 in 2003:

If you take the 800 Dow level of 1971 and multiply it by 10, you get 8,000.  If we repeat this, and that’s what I’m expecting, the Dow will trade between 6,000 and 10,000 for the next several years.  And gold will move from $350 an ounce up into the thousands.  Gold could go from $350 to $8,000, which is no crazier than going from $35 to $800.   

    What James Turk is relating here is the fact that monetary inflation has caused stock prices to increase by ten-fold (or more) since 1971 and we should expect the same when the Dow and gold prices were both 1:1 in 1980.  In other words, since stocks, cars, homes, gasoline, and everything else costs ten times more than the 1970s, the price of gold and silver should also be commensurately more.  This is further evidence that precious metals are seriously undervalued.  In the final analysis, gold and silver is not getting more expensive – the currency is getting cheaper through credit expansion and currency devaluation.  And as Austrian economist Ludwig von Mises has warned, “There is no means of avoiding the final collapse of a boom brought about by credit expansion.”   

      It is also noteworthy that 1971 was the same year that America officially “decoupled” gold as a monetary base for the U.S. dollar during the Nixon administration.  This action led to a 2,500% increase in the price of gold as foreigners sought to hedge against the dollar.  Today, smart investors are again hedging against the dollar and we are seeing gold and silver appreciate.  In 2009, investment demand for gold is up 47% in India, 53% in China, and 67% in Saudi Arabia.  Currently there is $120 trillion in global financial assets and less than $1.7 trillion in above-ground gold and even less silver available.  This kind of ratio is going to cause the price of metals to soar and smart investors are consolidating their holdings into gold.