Gold provides no yield either. All you get is asset protection. But with gold reaching up towards $1,000… and making huge gains every year… you might wonder why investors don’t favor gold over treasuries. We wonder too.
But imagine that you have a bill to pay… or a liability of some sort… also denominated in dollars. You don’t know how much the dollar will be worth when the bill comes due, but you know you can cover it with dollars. Gold, on the other hand, poses some additional uncertainty. While the price has doubled and doubled again since its bottom in 1999, you never know.
Gold doesn’t always go up. Sometimes its goes down. And after it has run up so sharply, it is reasonable to expect a correction. The price could go down 20%… or even 30%… before it resumes its upward march.
If that would worry you… don’t buy it. If, on the other hand, you want a way to preserve your wealth over the long term – even if it means giving up current yield and possibly taking a 30% capital loss sometime in the next year or so – gold is the ticket.
The price of the yellow metal will probably go to $2,500 before this bull market is over. If it goes down to $700 or so before – well, we’ll just wait it out, happy to be holding gold, rather than say, shares in Blackstone which went down 55% already… or shares in a hedge fund that may disappear altogether… or an extra house with a stopped-up toilet.
Our advice remains unchanged. Sell stocks on rallies. Buy gold on dips.
This is not advice for speculators, however. We offer no guarantees as to what either stocks or gold will do this year or the next. All we know is that we have faith in our fellow human beings. Given an opportunity to make a mess of things, they will. And nothing gives a richer opportunity than a pure paper money monetary system. One day, when the dollar is utterly worthless, gold will still have value.
Markets and Money