The Great Depression Online

Great Depression Online Archive Issue:

Should You Buy Gold Right Now?

Great Depression Online
Long Beach, CA
September 22, 2009

Inside This Issue You Will Discover…

*** Losing Money Has Never Been Easier
*** Insurance Against Government Cleverness
*** Should You Buy Gold Right Now?
*** And More

Losing Money Has Never Been Easier

If you have $100,000 – or $10,000 for that matter – to your good name…congratulations.  You are a rarity in today’s economy.  But now you’re faced with an enviable, yet difficult, question: Just what the heck to do with it so you don’t lose it?

There are as many ways to invest as there are ways to skin a cat.  Yet some ways are better than others.  And sometimes markets require more thought than others.  Over the last 30-years, for example, a 60/40 percent stock to bond portfolio allocation did quite well.  Investing was simple, easy, rewarding…and fun too.  Stocks went up.  Interest rates went down.

That no longer seems to be the case.  Nowadays investing takes more thought, caution, and vigilance.  For losing money has never been easier.  And making it never harder.  Even with the S&P500’s 58 percent bounce off a 12-year low on March 9th, it’s still down 32 percent from its peak. 

~~~~~~Gold and Silver eBook~~~~~~

Gold bugs have long touted the yellow metal’s time-tested store of value.  But, contrary to popular opinion, gold isn’t always the best investment when times get tough – and we have the analysis to prove it.  Our friends at Elliott Wave International recently released a brand-new eBook that will help you decide just how – and when – gold and silver should be put to work in your portfolio.

Among the unique insights in this free eBook are 6 eye-opening tables that reveal how gold and silver performed vs. stocks and T-notes during each of the 11 recession-expansion cycles of the past 100 years.  These tables alone are worthy of a high price tag, but you can download them for free.  You'll also get valuable analysis for gold stocks, precious coins and more – all at no cost.

How to Benefit from Gold’s Next Move


What’s more, being out of the market and safely in cash or treasuries may not be safe at all.  Rather it may be unsafe, risky, and downright dangerous.  You likely know all the reasons why this is so: inflation, paper money, central bankers, deficit spending…you have all that and much more to worry about.

So if you do have a grubstake you’ve schlepped and saved to acquire, where should you put it so it isn’t burnt to a crisp by the market’s next conflagration like sagebrush during a California wildfire?

Gold’s a proposition we’ve been hearing more and more of as of late.  But should you really buy gold?  That is the onus of today’s deliberations.

Insurance Against Government Cleverness

Gold has always been the asset of last resort.  No government controls its supply.  It can’t be printed or created out of thin air.  There’s no IOU attached to the back of it.  It’s entirely sovereign.  And in times of uncertainty, like now, people hold it for wealth preservation, as trust in the world’s currencies and the government’s that issue them, are called into question.

Still, gold, like cigarettes or sea shells, is only worth what people believe it is worth.  Right now, people believe it is worth over $1,000 per ounce.  Ten years ago they believed it was worth $300 per ounce.

We here at the GDO believe you must buy low and sell high to make money from an investment.  Therefore we liked gold a lot better at $300 per ounce, or even $500 per ounce, than we do at $1,000 per ounce. 

But then again, we don’t consider gold an investment.  We consider it insurance against government cleverness and the government’s ability to destroy a currency.  Currently the central bankers of the world, the Federal Reserve included, seem hell bent on destroying their currency. 

They believe printing massive amounts of money is how to prevent a depression.  They want inflation…and they want it bad…even if it kills us.

Yet after the 60-year credit expansion began contracting in earnest over the last two years inflation is more scarce than gold itself.  The Federal Reserve ads a trillion dollars to its balance sheet and the money supply shrinks.  What the Fed gives, the credit market takes away.  Banks don’t lend it.  Consumers don’t borrow it.

Should You Buy Gold Right Now?

Just last month the Labor Department reported the Consumer Price Index had fallen 2.1 percent over the past 12 months…the sharpest over-the-year decline in 59 years.  During gold’s last bull market, which ended in 1980, the CPI was over 13-percent.  The following year the 10-Year Treasury Note yield topped 15-percent.

Today the CPI is falling and the 10-Year Treasury Note yields just 3.5 percent.  Still gold’s price continues to rise.  What gives?

Is it a mere certainty that inflation will soon return and that it will return in force?  The market, speculators included, certainly seem to think so.  But what if there’s no swift breakout of inflation?  What if consumer prices drop or even remain flat?  At some point won’t the price of gold drop too?

Perhaps it will.  Perhaps it will not.  Quite frankly, we don’t know.  In fact, no one knows.

Still, even with this uncertainty, we’ll answer the question: Should you buy gold?

Yes.  If you don’t own any, go buy some.  By no means are we suggesting you take your $100,000 down to the local coin shop to trade it in for Krugerrands.  But we do think it is prudent to pick up a couple ounces now…a couple more a few months from now…and a couple more a few months after that – until you’ve safely backed your life savings with a modest foundation of gold.  How much precisely is different for each individual, but 10-percent of your investment portfolio may be a good target to shoot for.

The point is, if you don’t own any gold you should.  Then, once you do: Don’t trade it.  Don’t sell it.  Just hoard it as insurance against the end of the world as you know it.  Last month the largest paper money experiment in human history turned 37-years old.  We’d be remiss to not have a little wealth stashed away in gold just in case man’s elaborate creation goes awry.  

While gold prices could fall in half, or more, they will never fall all the way to zero.  The same can’t be said for stocks, bonds, or the dollars in your bank account.

With any luck, the gold you buy you’ll never need.  But if you do one day need it.  You’ll be glad you have it.


M.N. Gordon
Great Depression Online

P.S.  If you have even the slightest interest in gold and silver, you must consult this free 40-page eBook now.  It will show you how to invest in precious metals safely and successfully like no other resource can.

Check out the Gold and Silver eBook here.


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