Gold Climbing The Wall Of Worry

Gold has risen from $255 in 2001 to about $1300 in late January 2019, stronger than the commodity index. Real money—gold—is always desirable. The ratio has risen since the 2008 crisis when Asian investors, governments, and central banks wanted gold more than U.S. debt paper and other commodities.

The gold to silver ratio has reached a multi-decade high. This tells us two pieces of useful information.

  1. Both gold and silver are inexpensive when measured in dollars.
  2. Silver is undervalued compared to gold.

The ratio is a reliable long-term timing indicator. It forecasts higher gold and silver prices ahead.

CONCLUSIONS:

  • Stocks have rolled over. John P. Hussman Ph.D. has the data to support his belief that the S&P 500 Index should eventually fall about 2/3 from its high. Expect more downside.
  • Risk versus reward analysis is important. Stocks are risky. Currencies are debts issued by central banks, not real money. They are legally required and convenient, so we use them, but not because we trust politicians and central bankers. Currencies, issued by insolvent central banks, will decline in purchasing power, as they must. Unbacked paper currencies eventually fail. Gold is always valuable.
  • Silver is under-priced. This is changing in 2019.
  • Gold prices built a long-term base and will ascend the wall of worry.
  • For a five year investment, would you rather own a one-ounce gold coin, $1300 in debt notes (cash) issued by the Fed, a certificate of deposit paying squat, or shares of a hyped FAANG stock with massive debt and a sky-high price to earnings ratio?

I suggest silver and gold coins and bars stored in a non-bank owned vault. You will sleep better as the stock market regresses to its mean (lower) and panic, not profits, becomes the concern for 2019.

 

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Miles Franklin sells silver. Call them at 1-800-822-8080 and tell them you agree with the Deviant Investor about silver.

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