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Gold Armor Against Inflation
Many experts say that double-digit inflation like we had during the Carter administration is just around the corner. And some of them say the only way to protec...
Some experts say that hyper-inflaton is just around the corner. And they say the way to protect yourself is to own gold and other precious metals. We asked financial planner Allan “dare to be dull” Roth about the pros and cons of being a gold bug. He gave us permission to use this column which first appeared in October on CBSMoneyWatch:
Gold to hit $3,500
Gold soared past $1,400 on its way to $3,600, according to one industry expert. While a few weeks behind schedule, Gold soared past the $1,400 mark based on the decline of the dollar, and fears over Euro Zone debt fears.
“We have a combination: inflation fears, currency market uncertainty, fears about the financial strength of some countries,” said Alexander Zumpfe of Heraeus Metals.
Compelling logic for $3,500 gold price
The price of gold will rise to over $3,500 per ounce in the next two years, according to precious metals analyst, Andre Hudson of Walwyn Stodgell Chochran Murray, Ltd. Hudson told the Montreal Society of Financial Analysts that gold has dramatically outperformed the stock market in the last seven years and is likely to continue to do so.
Hudson noted that hyperinflation is imminent and discredited the value of currencies. He noted the past 250 years of agnol0saxon political and economic dominance was an adoration in human history. “Accept the fact that North America is less equal in economic and political power” than other parts of the world, Hudson noted.
Hudson noted that his views had not endeared him to the financial community for taking such views.
The rest of the story
The logic used by Hudson is compelling and difficult to argue with. I have one additional fact, however. Hudson’s prediction was noted in the October 16, 1980 edition of The Montreal Gazette, more than three decades ago. This was about the time I bought gold and earned a 2.5 percent annual return, far below inflation.
Do Hudson’s arguments sound familiar? The prediction that currencies will crumble and we will all be using gold to buy our groceries is not new. In times of fear, the same old arguments resurface. To borrow a line from the great Paul Harvey, now you know the rest of the story.
Why I love gold bugs
People are hard wired to buy high and sell low and will always be chasing performance. The hotter the performance the more predictions of further increases and the more people will buy.
It’s easy to profit from irrational investors. Precious metals and precious metal stocks are great diversifiers as they often move in directions not correlated with the stock market. But now I’m selling some of my precious metals stock fund in some good old-fashioned rebalancing. This is a fool-proof way of going against the herd.
My advice
Compelling arguments such as Hudson offered in 1980 are often wrong. Never underestimate the human ability to develop brilliant arguments to support any decision we make in the pursuit of financial gain. I can’t guarantee what the price of gold will be in two years. I can guarantee that buying it today will be following the herd and buying after a big run up.
More on MoneyWatch
Gold – My Best Investment Ever
How to Profit From Irrational Investors – Which is Almost Everybody
To reach Mike: mcausey@federalnewsradio.com
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