Russell: Gold is “King of Currencies”

Release Date: 
Friday, December 5, 2014

Gold and Silver Prices

Gold prices and silver prices moved higher this week but gave back some of the gains on Friday after the release of a strong non-farm payroll report. “Gold prices slumped Friday following a stronger-than-expected jobs report dulled the precious metal’s shine as a safe haven. The Labor Department said the U.S. added 321,000 jobs in November, the biggest gain since January 2012 and well beyond the 235,000 that were expected…A day earlier, gold closed in the red but held tight to the key $1,200-an-ounce level after the European Central Bank decided to hold off on additional stimulus. The ECB left its key interest rate unchanged at 0.05% and announced that it will wait until 2015 to consider additional market supportive measures, including buying European sovereign debt.” (“Gold drops after blowout jobs report,” MarketWatch, 12/5/14.)

Gold finished the week up $25.25, closing at $1,192.60. Silver prices closed the week at $16.29, up $0.83.

Russell: Gold is “King of Currencies”

Veteran newsletter writer and publisher of the Dow Theory Letters, Richard Russell, reminded subscribers why he owns physical gold.

“I have sat with physical gold over recent months and have never suffered anxiety or lost a night of sleep. I never planned to create profits from my gold position, I simply wanted to retain my purchase power. So I bow to gold, the King of Currencies – in gold we trust.” (“Richard’s Remarks,” Dow Theory Letters, 12/3/14.)

“My purpose in holding physical gold is simply to be safe and retain my purchasing power. Money is made based on the purchase price. Buy any item cheap enough and you will be almost guaranteed a profit if you hold it long enough.” (“Richard’s Remarks,” Dow Theory Letters, 12/2/14.)

U.S. Economy Overtaken by China

China has dethroned the United States as the world’s largest economy.

“The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet. It just happened — and almost nobody noticed. The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in ‘real’ terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.” (“It’s Official: American is now No. 2,” MarketWatch, 12/4/14.)

Gross Critical of Central Bank Policies

Bond king Bill Gross wrote a letter to clients highly critical of current central bank policies.

“The Janus Capital portfolio manager and Pimco founder takes the Federal Reserve, Bank of Japan and European Central Bank to task for using monetary policy to make it easier for governments to run up debt, all in the hopes of stimulating anemic global growth.”

“‘Perhaps the last five years have been one giant nursery rhyme. But each of these central bankers is trying to achieve the same basic objective: Solve a debt crisis by creating more debt. Can it be done?’”

“‘In the U.S., as elsewhere, there has been little focus on public investment and infrastructure spending. It's been all monetary policy, all of the time, with most of the positives flowing over to markets as opposed to the real economy. The debt currently being created is not promoting real growth and solving a debt crisis—it is being used by corporations to repurchase shares and accentuate the growing inequality between the very rich and the middle class.’”

“‘How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt? How could fiscal authorities have stood by and attempted to balance budgets as opposed to borrowing cheaply and investing the proceeds in infrastructure and innovation? It has been a nursery rhyme experience for sure, but more than likely without a fairy tale ending.’” (“Bill Gross: You can't cure debt with more debt,” CNBC, 12/4/14.)

From Our November 15th WIR—Fidelity: Gold a Form of “Financial Insurance”

Joe Wickwire, research analyst and portfolio manager with Fidelity Investments discussed the benefits of including gold in a portfolio at the London Bullion Market Association Precious Metals Conference this week.

“As many as 40% of mining companies cannot turn a profit with prices below $1250. We can extrapolate therefore that if prices do not rise from where they now languish ($1163) many mining companies will fold. This would lead to a supply crunch and consequent rising prices.

“Mr. Wickwire reviewed the conditions behind the surge in gold price from 2001 - 2008 and concluded that similar dynamics are currently in operation. ‘Today is quite similar - there are negative real interest rates, while countries are using currency as a policy tool to support nominal growth at the expense of real growth. And on top of that, supply from the gold industry is starting to come down.’ He emphasized the importance of owning gold as a form of financial insurance and concluded, ‘It's important to remember that a little gold goes a long way. If you had 5-10% allocation in your portfolio from 2000 to 2010, you wouldn't have suffered a lost decade.’” (“‘Now Is A Good Time’ To Buy Gold - Fidelity Investments,” Gold Seek, 11/13/14.)

A December You’ll Remember—Call Now for Special Year-End Offers

While you search for the perfect gift for everyone on your list, Goldline is keeping you in mind with our year-end specials. This December, when you open a self-directed IRA with Goldline’s Express IRA® program, Goldline will cover your IRA fees for the first two years with free additional limited production bullion coins.* And, with every qualifying purchase of $10,000 or more of limited production, exclusive bullion coins, you will receive a $200 gift card to a popular national retailer.

In a season of giving, we strive to give a little more.

Call 866-867-4466 to learn more about Goldline’s December specials.

Limits and conditions:

  • Limited time offer – qualifying purchases must be confirmed no later than December 31, 2014 at 6pm PST.
  • This offer is not available to current or former Goldline employees. This offer may not be combined with Goldline’s Price Guarantee Programs or Price Shield℠.


*Coins are valued at their ask price

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:

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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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