Going for the Gold!

 

Gold has had an incredible run over the last decade, but I say $2,000 an ounce may only be a rest stop before the real parabolic move begins. I cite the deteriorating global economy, and the move out of fiat currencies by central banks.

Yours for resource profits,

Kevin

Video Transcript

Hi, this is Kevin Kerr for Uncommon Wisdom Daily TV.

The rising price of gold is hardly breaking news; it’s been on a meteoric pace for the last few years. But what may surprise you is that we’ve barely even seen the start of this massive rally.

Everyone from individual investors to central banks are snapping up gold hand over fist. And $2,000 an ounce may just be a rest stop before the real parabolic move higher. I’ve been making this argument for nearly a decade now, battling it out with gold bears on TV and radio since the precious metal was trading at around $450.

At that time, I called for gold to hit $2,000, and while those on the other side of the argument called me crazy, they’ve been proven wrong time and time again. But even so, they’re still saying gold is overbought. Even Ben Bernanke, the chairman of the Federal Reserve, has basically denied that gold is money.

But let’s look at the fundamentals driving the gold market today. We still have high unemployment, zero interest rates, endless printing of fiat currency by the Fed, and a debt-to-GDP ratio that is mind boggling. Now add to that mix the disintegrating euro, and possibly the end of the European Union itself. In other words, the global economy is worse now than it was before gold shot up from $450 to $1,900 an ounce.

But I believe these economic conditions pale in comparison to another factor that will drive gold prices higher in the future, and that’s central bank buying. Policymakers across Europe have become net buyers of gold for the first time in more than 20 years, which is a clear signal that things in the currency and debt markets are very uncertain.

In addition, Mexico, Russia, South Korea and Thailand have all made sizable purchases this year. The reason for that is clear: They want to reduce their exposure to the dollar. Worldwide, central banks are set to buy more gold this year than at any time since the collapse of the Bretton Woods system four decades ago, which by the way, was the last time the value of the dollar was linked to gold.

All this buying has lifted the price of gold by more than 25% just this year. But on a relative basis, the purchases are small compared to the size of the gold market overall. So just imagine how high gold could go if the global economy gets even worse.

That’s why I believe all the elements are in place for another explosion to the upside. And $4,000 an ounce gold is not out of the question.

There are a lot of good ways to get in on the action, including gold coins, bullion, key mining shares and options on futures. Diversification and risk management are key, and that’s why I favor two large gold ETFs: The Market Vectors Gold Miners ETF, and the SPDR Gold Trust.

But if you want to go for even greater profits, you can consider trading options on these ETFs. That strategy provides greater leverage with an added bonus, limited risk. In fact, subscribers in my Master Trader service just grabbed a profit of more than 125% on a GLD option position in just 17 days.

The bottom line is that gold has had an incredible run higher over the last few years. But that could simply be a dress rehearsal for the real show that’s about to begin. As central banks and individuals shift out of fiat currency, one of the few safe harbors is gold. It’s that simple.

So don’t be intimidated by the gold bears. Take action and hedge your portfolio against the falling dollar and euro using limited risk strategies like I discussed.

I’m Kevin Kerr for Uncommon Wisdom Daily TV. Thanks for watching.

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