Investors Need Gold And Silver As Calamity Insurance – King

Release Date: 
Friday, December 4, 2015

Gold and Silver Prices
Gold prices rallied on Friday to end the week significantly higher despite a positive jobs report and continuing expectations that the Federal Reserve will raise interest rates this month.

“Gold futures rose Friday, after earlier losing ground as November jobs data reinforced expectations the Federal Reserve will deliver a rate hike later this month… Gold traded sharply higher after initially trimming gains following the jobs report…

“The U.S. dollar, which fell sharply versus major rivals, particularly the euro, on Thursday, bounced back, with the data underlining expectations the U.S. central bank will raise interest rates for the first time in nearly a decade when policy makers meet on Dec. 15-16. Expectations for tighter monetary policy have pressured gold this year, with the yellow metal slipping to nearly six-year lows earlier this week.” (“Gold futures rally after strong payrolls data,” MarketWatch, 12/4/15.)

Gold ended Wednesday up $14.40, closing at $1,086.30. Silver prices closed Wednesday at $14.55, up $0.29.

Investors Need Gold And Silver As Calamity Insurance – King
Outstanding Investors editor and hard asset commentator Bryon King penned a commentary explaining why every investor should include gold and silver in a diversified portfolio.

 “Today I want to share with you an email from a friend and reader… The email was short and crisp, the note stated, ‘Warren Buffett hates gold. Why do you like it?’ …

“To answer the reader’s question right out of the gate, I like gold because it’s a form of insurance — monetary insurance, of sorts. When (not if) something bad happens to our nation’s currency, I want to own gold. Allow me to go out on a limb here. When things go deep south for the dollar, gold won’t be one of Buffett’s ‘unproductive assets’, I suspect.

“Now, you might be wondering… is something bad going to happen to the dollar? Well, yes, sooner or later. If history is any guide, we — the country, that is — have a major panic or currency crisis every generation or two…  The takeaway is that when wheels fall off the economy and/or our currency takes a hard hit, you’ll know what I mean. For now, every respectable portfolio ought to hold about 5-10% in physical metal — meaning gold or silver… But you owe it to yourself and your family to hold some amount of real precious metal. Gold (and silver) make for insurance in not just bad times but very bad times…

“I have an acquaintance named Nando Parrado… Some years back, Nando owned and operated a string of businesses in Uruguay and Argentina. Things went well for Nando; he had plenty of money in the bank — U.S. dollars, in fact. He was quite well-off.

“Early one morning, while he was still in bed, the telephone rang. It was a business partner, calling to say, ‘Nando, the government is closing the banks today. I don’t think we’ll be able to get to our money.’ Sure enough, the government of Argentina nationalized all dollar-denominated assets, literally overnight. The impact of the currency seizure instantly crossed the border to neighboring Uruguay as well. Literally billions of dollars of ‘wealth’ vanished with the stroke of a pen by some officious, socialist-populist minister in far-off Buenos Aires…

“What did Nando and his friends do? ‘Well,’ said Nando, ‘we realized that all our dollars were gone. So we went to lunch. Then we all went to the movies. And I had some gold, so I was able to convert that into enough money to start out again.…’

“I’ll sum up by saying that Warren Buffett can do what he wants. But unless you’re hyper-wealthy like him, you need “insurance” in the form of gold. You just never know.” (“Why you should buy gold even though Warren Buffett hates it,” Business Insider, 11/29/15.)

Half of Gold Being Mined Unprofitable; Bullish for Prices
Bloomberg Business reported the cost to mine half of the world’s gold is below current prices, making the gold unprofitable for mining companies.

“Half of the gold coming from mines may not be viable at current prices, underscoring the industry’s need for consolidation and output cuts, according to the best-performing producer of the metal in the past decade. ‘The more we continue to produce unprofitable gold, the more pressure we put on the gold price,’ Randgold Resources Ltd. Chief Executive Officer Mark Bristow said in an interview in Toronto on Friday. ‘In the medium term, it’s a very bullish outlook for the gold industry. The question is, how long are we going to supply it with unprofitable gold?’…

“Gold miners buffeted by the drop in prices are shortening the life of mines by focusing only on the best quality ore, a practice known as high grading, which will restrict future output and support higher prices, according to Bristow. He said in a presentation to bankers in Toronto that the industry life span is down to about five years because companies have been aggressively high grading at the expense of future production.” (“Half of Gold Output May Not Be ‘Viable’ as Price Sags: Randgold,” Bloomberg Business, 11/27/15.)

World Economy is “Crumbling”; China, Gold Will Rise - Price
Billionaire and hard currency analyst Hugo Salinas Price warned his readers the current world order is “crumbling” and, in the end, China will emerge with gold as its currency.

“At the present time, the system at work since the end of World War II is operating in reverse. Reserves are falling, the majority of which are held in Dollars. Government Bonds held as Reserves are being sold off. An important contraction in world commerce is taking place…

“What we are witnessing these days is a mighty contraction in economic activity around the world that reinforces itself. International Reserves are being sold off in a desperate search for liquidity. The contraction was originally seeded by a slow-down in the economies of the Reserve-issuing countries, i.e., USA, Britain, Europe and Japan.

“The Chinese evidently have some plans which they are not divulging, for we see that China is purchasing huge amounts of gold. In the meantime, the US insists on trashing the price of gold, as if to say that the Dollar is and will remain the world's supreme currency till the end of time. China is quietly accumulating gold and saying nothing. But we can try to guess what China is thinking: ‘The US is mired in an insoluble problem. Do nothing to provoke the US. The US will destroy itself in a huge collapse.’…

“What lies ahead is a situation where each country will attempt desperate measures to ensure a minimum of internal stability. Treaties will be ignored or thrown overboard. Devaluations around the world will proliferate; some countries will declare bankruptcy. The gravity of the crisis will make these events inevitable…

“When push comes to shove, China, with 1.3 billion or more population, will take unorthodox measures…  China will then say to the world: ‘We sell cheap. Very cheap. But, we sell for gold, for very little gold; and we pay with gold for what we buy - for very little gold, but we pay gold. You want our stuff, you find a way to pay us in gold. Or else, what do you have to offer us, in exchange for our stuff? You have something we want - we pay in gold. Rest of the world, do as you please.’

“The nations of the world are not going to flounder endlessly in the crisis that is upon us. Out of the huge crisis, China will break away and state its terms. And the terms will be: GOLD. The rest of the world will follow.” (“The Crumbling World Order and Who Will Pick Up the Crumbs?”, 12/1/15.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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