Lear Capital: Another Day in the Life of Gold

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Swiss Gold
A China Gold Tael (37.5 gram) along with other one-ounce gold coins are displayed in this illustration photo in Hong Kong June 20, 2012.

As we no longer watch the countdown to the New Year, but rather the days until we reach the cliff hanger, we read reports about and/or see the daily ups and downs of the price of gold.  That, however, does not change the long-term outlook for gold.

“Gold is finding it difficult to convince the masses that it should…be benefiting from the uncertainty and rising concerns surrounding U.S. fiscal cliff negotiations rather than being weighed down by the negative sentiment,” said analysts at UBS. – Reuters

Jim Rogers, CEO and chairman of Rogers Holdings, insists on holding onto his gold.  In fact, he has stated a couple different times that “if it goes down, I hope I am smart enough to buy more, and I hope I am smart enough to buy more silver, because precious metals are going to make a lot of money for a lot of people in the next decade. Over the longer term, gold is going to go much higher because the world is doing nothing but printing money. And when the world economies get bad again, they’re going to print even more money.”

Sound familiar?  I think I heard something about printing more money once or twice recently.

Just last week, gold dipped as much as $30 an ounce, and the “talking heads” were quick to jump on the story of gold’s demise.  But let me ask you this…  If your millions, maybe billions, were diversified among stocks, bonds, real estate, precious metals, etc. and you knew that D-day for higher taxes was coming – that being January 1, 2013 — which would you rather do: take income in the year you would pay less taxes, or take income in the year that you would pay more taxes?   That’s what happened to gold; investors took advantage to sell to pay lower taxes now instead of later.  Reportedly, 15,000 long-term futures contracts – contracts for long positions – were cashed in before D-Day.  What does that do to the spot price of gold?  It drives it down.  Gold prices rebounded a few days later, and then more sellers came along.  But even today, after a $20 drop, gold is still up over 9% since July 2012.

Yes, gold may go down in price, and yes, it may go up.  Every investment (stocks as well as gold) have correction periods, but those are small losses with hopes of larger gains especially if the (currently unstable) economy hits us upside-the-head with unexpected (or is it?) turmoil and struggles.

So, as Yoda would say, wise decision on gold, this is….hmm?

This is just me and my thoughts. As always, if you want to learn more, contact Learcapital.com for more information.

 

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