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Gold Maginot Line Broken – Time to Buy Insurance

The breakout in gold and silver that we have been patiently waiting for is now starting. The long term up move in the precious metals, which have been pausing since 2011, is now resuming. We can with confidence expect all the short term resistance levels to be broken. The first obstacle was the Gold Maginot Line at $1,350. As I have said for quite some while, this 6 year resistance was always guaranteed to break. It has already been broken in most currencies, so gold in dollars was never going to hold out for much longer. And today it happened in Asia and Europe with gold reaching $1,358.

As expected, when the Comex opened the gold paper boys used their paper soldiers to push gold and silver down. But they will fail, maybe already by the close today or certainly very soon.

REAL UP MOVES IN GOLD NEVER START ON COMEX

My experience is that the real up moves in gold normally start in the Far East or in Europe and this was the case today. Comex is not a trend setter, just a disrupter, since they deal in paper gold. The New Case for Gold Rickards, James Best Price: $0.25 Buy New $6.99 (as of 11:36 UTC - Details)

Next target for gold is above $1,600 and for silver $25 at least.

At the beginning of this century, we judged that risk in the financial system was becoming too elevated for comfort. We thus came to the conclusion that there would be serious problems in the system, leading to money printing and currency debasement and that wealth protection would be critical. Which asset to use for insurance against these risks was an easy choice since physical gold is the only money that has ever survived in history and is no one else’s liability. Although the first only started in 2006, the gold price was giving clear indications already from 2002 and this is actually when the real move up in gold started.

AN OUTSTANDING CENTURY FOR GOLD

So let us look at how gold has performed from 2002 – 2018 in three major currencies, namely US Dollar, British Pound and Euro:

The first remarkable observation is that from 2002 to 2012, Gold in Dollars did not have one single loss year. The average annual gain for gold in that period was 20%. The six year correction 2013-18 has been both long and significant. But we must remember that the long term bull market in gold started in 1971 at $35. And the latest uptrend in gold began in 2000 at $250.

A significant correction is part of climbing the ladder of worry.

If we look at the whole period 2002-18, Gold in Dollars and Pounds have, in spite of a major correction, gained a very respectable annual 12% on average and also outperformed the Dow Jones and all global stock markets.

Gold in Euros returned an average of 14% 2002-12 and 9% in 2002-18. Interestingly, Gold in Euros had a significant correction (31%) only in one year which was 2013. That was also the year that Gold In Euros bottomed.

Gold has also outperformed all stock markets since 2002 (even more so since 2000). The Dow for example (excl. dividends) has lost 46% against Gold since 2002.

If we compare the return on Gold to interest rates, it is far superior. Dollar rates crashed from 2007 and were at zero percent between 2008 and 2015. Euro rates are still negative up to 12 years’ maturity which is quite remarkable. Between 2002 and 2018, interest rates averaged between 2.5% and 0% depending on the currency. With gold returning annually 9% in Euros and 12% in Dollars and Pounds in the same period, it clearly has outperformed the return on Fiat money.

So the conclusion is straightforward. Whether we take 2002 as a start year, since that is when our company decided to invest significant amounts in physical gold, or we take the whole of this century, Gold in all currencies has outperformed all major asset classes and naturally Fiat money.

WHY DID NO ONE IN THE WEST DISCOVER THIS SECRET

Aurum non gratum – Gold not welcome. So why is gold not acceptable by Western investors, Governments, or Central Banks. Western Gold Reserves have been reduced significantly in the last few decades. It would be surprising if there are even half of the 23,000 official holdings left.

Most of the gold has probably been covertly sold or leased to the market and bought by China, India or Russia. All Central Banks hold is a worthless IOU from a Bullion Bank that they are owed gold. The Bullion Banks can of course never get hold of the physical gold to honour the IOU.

Gold is the best kept investment secret in this century. It is such a well kept secret that less than 0.1% of investors have participated in the ascent of gold since 2000. As a company, we entered the gold market at the beginning of 2002 when gold was $300 an ounce. Our analysis at the time was that gold was an asset which was unloved and oversold at the same time as risk in the world was increasing rapidly.

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