A Question About Gold

US$20Gold-pile

QUESTION: Dear Mr. Armstrong,

I “think” I am finally beginning to grasp some of what you have been preaching, but first allow me to say “thanks” for everything you do to help some of us understand what is unfolding all around us, and “how” everything is connected, and that nothing happens in isolation, again, “thanks” !

Also, I wish to say I started to read everything you published, beginning with when you were in jail (bless you for being so strong & standing-up for your rights), and now crave everything you publish as it helps me and my family to finally make sense of all this chaos headed our way..

You are indeed unique, so I only hope you continue your work, what a generous act on your part, if only the politicians had an ounce of your integrity.

I have a question of personal finance, and would venture to guess many others are in the same boat, so hopefully this e-m gets to you and that you have time to read and respond, I apologize for its length. To begin, I must also confess that I am one of the ignorant masses that fell for the whole gold bug thing believing we would experience massive inflation with the issuance of QE1, and 2 and so on…not realizing that the world could easily absorb, and that PM’s only rise when there is a “loss of confidence”….

I had bought gold way back in the 80’s but only a small percentage of my assets, but as prices went-up, I fell hook-line & sinker, and went all in, first paid off all my debts, sold off my paper assets, IRA’s, paying taxes due, accumulating only physical gold & silver, which is all we have now, excepting our house and some raw law, everything is paid for, no debts, none… My average cost is about where the market is now..

Since I wasn’t smart enough to listen and believe you early-on, I accumulated up to 2011, then started to build cash…My wife and I are still employed but reaching our late 60’s, and had hoped to retire soon, but seeing that PM’s will not stand a chance to go higher for some time, we continue to work…

Finally, I come to our question, with the lows not in yet on PM, and may not come for awhile, with “Big Bang” getting closer, am I better off sitting tight, and hoping for the best, or selling out and converting to cash, paying capital gains if any, then buying again into equities since the market keeps climbing ??

One final note, I traveled up to your Philly conference couple of years back, to ask you this singular question, but you were mobbed, and I only got close enough to ask through all the other admirers, but fumbled the question, which was “Do you own gold ?”, your response was “I give it to my grandchildren”, which I took to mean “sit tight”, but that was then, now is now…. And since I didn’t properly ask the question, I come back again, hopefully, properly asked this time around.

Thank you ever so much for the good you do for everyone in such a selfless manner, and please don’t pay attention to the negative comments that some choose to throw your way,

They don’t want to admit they are wrong, and I clearly see now that I was….They need to “man-up”, and be a Mensch, just like you were for refusing to knuckle under when they had the audacity to illegally put you behind bars, a criminal act !

Thank you,

C

GC-1982 Dollars

ANSWER: Yes I own gold myself. Gold is like fire insurance. It is the HEDGE against government – not inflation. If you have bought gold expecting to make money short-term, then you have wasted a lot of time. Trade the trend. What is wrong with selling gold at the high and buying at the low? I just do not get that. As an insurance, yes I only buy common date US $20s. No bullion in bars etc. That is the “just in case” hedge. It is NOT an “investment” It is plan B. Trading gold back and forth I prefer the “paper” gold thank you. Liquidity is king. These are entirely different things. What I object to is feeding people nonsense who then put everything they own into gold and then lose the farm. That is totally bad advice and uncalled for. I do not care what the investment is. You NEVER advise people to buy anything and don’t worry just hold forever no matter what. That is bad advice for stocks, bonds, or gold.

Emerging markets saw central banks buying gold because they had none. Does that reflect anything? No not really. We saw Britain sell in 1999 at the lows. The danger we face is we may see Western central banks sell gold as the economy turns down hard and they need cash to meet EU austerity. Central banks have bought the highs and sold the lows many times. So that is not an indicator that implies anything. The numbers are the numbers. The market is never wrong, only the fundamentalists who try to rationalize the far too often irrational. Why? Because markets move NOT on facts, but on anticipation. The old trader maxim, – BUY THE RUMOR SELL THE NEWS and that applies to any market.

Cash will be king. Buying dips in equity is the best play for now. As I showed the Energy Models do not warn of a major peak as of yet, So we should continue to churn back and forth.

The metals will bottom on the Bechmark targets. Today, gold has collapsed again back down to the 1208 level. All the screaming, hollering, kicking, biting, and name-calling will not prevent gold from meeting its fate. You have to realize there should be a retest of the 1980 high just under the $1,000 mark. There is a risk of testing the Yearly Bearish Reversal at $680. That would probably finish-off the gold promoters for quite a while. I think even a break of $1,000 will make them look rather stupid. But that is what you need at the final low. You have to have the 99% throw in the towel.