The bull market in gold has an incredibly long way to go. There are some analysts who have suggested we are beginning to enter phase three of this bull market, the mania stage, where the average person starts investing in gold. That may be true in a very minute way, but we still have a very long way to go.
Click to Play Robert Ian's GoldSeek Radio Commentary Download mp3
The other night I was out driving and happened to catch a radio interview with Neil Cavuto and Dave Ramsey. Now I have a tremendous amount of respect for Dave Ramsey and his overall message on financial management. However, when it comes to gold, the nature of gold and the role that gold now plays in our economy and worldwide monetary system, I regret to say, that he views gold as nothing more than a commodity, and has strongly suggested that his listeners avoid gold as an investment.
During the interview, a young lady had called in and asked what she should be investing in now that gold was at an all time high and rising. Dave Ramsey told Neil Cavuto in no uncertain terms that gold was a commodity, not an investment. He then went on to belittle the idea of gold by saying that you should not get your investment advice from late night TV commercials.
Comments like that, delivered with certainty and authority from extremely popular and influential financial experts, will, for the near term, keep the average person confused and indecisive about the validity of gold as an investment. And remember, at the end of the day, a confused mind does nothing. And that is exactly what countless listeners of that broadcast will do when it comes to seriously considering gold as, yes, an investment.
Why is gold an investment, and not just a commodity? Well if one looks at gold from the period of the mid 1980's to 2000, one could easily make the mistake of classifying gold as just a commodity. But to do so would negate nearly 6000 years of previous history, and what has transpired since this recent bull market in gold emerged in the year 2000. Over the past decade, gold has been the #1 asset class as an investment. It has increased over 500% and continues to rise.
In the year 2000, if you had $10k dollars in cash and put it in a shoebox under your bed, today, you'd still have your $10k in cash, but it would buy about 30% less due to the loss in purchasing power of the dollar. However, if you held your $10k in gold coins for the past decade, that $10k would be worth well over $50k today. Even after subtracting the loss in purchasing power of your money, you'd still be about 400% wealthier. So I ask you, is gold just a commodity, or has it re-emerged in its historical role as a currency and as an investment?
The wreckless printing of money during the housing bubble the first half of this decade, and now the wreckless printing of money via quantitative easing by the Federal Reserve, all but guarantees that the price of gold will continue to rise. Eventually, the price of gold will need to reach some kind of equilibrium with the amount of paper and electronic currency in existence. Inflation adjusted numbers put that figure at somewhere near $2400 an ounce. Inflation adjusted numbers based on how we measured inflation in 1980 are closer to $7700 an ounce. And if we factor in, as Adrian Douglas has, all the paper gold contracts that have been sold on the Comex and LBMA, that have virtually no gold to back them up, the future price of gold could be closer to $56k an ounce.
In order for governments the world over to write down the unsustainable value of their current debt obligations, the price of gold must be considerably higher. As long as high credibility, influential, mainstream media continues to view gold merely as a commodity, through the lens of 1985 to 2000, and ignore the thousands of years of gold as money, and what has been happening since the year 2000, the average person will continue to be misled about the only form of financial insurance that can protect, and in the current climate, actually grow their wealth. That insurance is called gold. Remember the time to buy insurance is before your house starts to burn down.
