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12/08/2011
Ramblings

I find it amazing that people can be anti-gold after watching it rise 20% year after year for a decade. It comes down to understanding economics and most people don't. Gold is a misunderstood unit of value. This is odd, considering the rarity of the metal. They only mine 2500 tons per year. That is hardly anything. Once demand appears (the recent SF Gold show was empty), there won't be any physical to be had.

From a simple analysis, everyone should want to own at least 10% of their net wealth in gold. That analysis should acknowledge that if the bond market has any BIG problems, gold is going to rise substantially. If the bond market holds, then you can always keep your gold for a rainy day. The odds of gold going back to $500 anytime soon are pretty slim (because of peak oil). And if you lose money on holding physical gold, that is probably a good thing. That means the world economy did not contract and kept on chugging along.

What happens when Greece defaults? And then Italy and possibly Spain and Portugal? And then their is Japan and the US. What about those bond markets? Is all of this going to be contained? Are you really so sure that you don't think you need gold?

Everything that is happening today points to a rising gold price. That could turn around, but anyone on MSNBC who smiles and says the US Economy is doing fine and then recommends financial, consumer, and industrial stocks is ignoring a pretty big elephant in the room. That elephant contains all of the problems and headwinds that we face. Getting through 2012 and 2013 without a bond meltdown is going to take a miracle. And only that miracle will keep gold from taking off.

I'll take gold today. And run from S&P stocks. The risk levels for stocks are very high if you ask me. It is time to be very defensive and see what happens to energy supplies and energy prices. Can the economy grow in the face of high energy prices and high debt loads. We can print money and write off debts, but we can't print gold or oil.

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