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As we turn the calendar over, there are probably two
dominant questions on the minds of most precious-metals investors: Will gold and
silver have a better year than the last two? And will gold stocks finally
break out of their funk?
2012 was an interesting year for our favorite metal.
On one hand, gold was up only single-digit percentages for the second
consecutive year: 8.3%, after rising just 9.1% in 2011. It was also
outperformed by the S&P 500 Index, though this was the first time since
2004 and only the third since 1999. On the other hand, the price has now
risen 12 consecutive years, overshadowing most other bull markets in modern
history.
Gold stocks as a group were down for the second
consecutive year. GDX (Gold Miners ETF) fell 9.8%, after dropping 16.3% in
2011. GDXJ (Junior Gold Miners ETF) lost 19.9% last year, after sinking 38%
in 2011.
Here's a snapshot of our industry for 2012, along
with how it compares to other asset classes.
Perhaps a more constructive way to view things is
from a longer-term perspective. How have these same sectors performed since
the 2008 financial crisis?
Over the past four years, gold and silver have provided
the best returns among major asset classes. Gold producers, meanwhile, have
collectively underperformed the metal, while the juniors as a whole have lost
money.
Some claim that gold is in a bubble, because it has
advanced so much. "It's already gone up a lot," they say. The
reality is, however, that this bull market is small compared to most others
in modern history.
Over the past 40+ years, our bull market would be
among the smallest of the major bull markets listed, in terms of percent
gains. It's about a quarter of what the 1970s bull market returned. A good
number of them also lasted longer than ours. Based strictly on percentages,
I'd bet that ours isn't over.
Further, history shows that bull markets tend to end
in a climactic blow-off top. For example, gold rose 120% in 1979. Our best
year was 32% in 2007. Hardly meteoric, and contrary
to how the typical bull market culminates.
And this is all without getting into all the
fundamental reasons to continue buying gold, which we've gone into frequently
in these Dispatches.
So what does the gold price do in 2013?
I think that's the wrong question. Since gold is the
best and longest-lasting way to store wealth ever adopted in history, and not
technically an investment, the more accurate query is: will gold continue to
protect my purchasing power?
Worded that way, we begin to see gold its
proper light: real money. If we're holding gold as money, the question then
becomes: how much is our purchasing power in dollars or other alternatives to
gold likely to decrease this year? And in future years?
If there's one thing we're certain of, it's that the
current path of debt accumulation, deficit spending, and money printing will
continue to devalue dollars and other unbacked
currencies – and probably at an accelerating speed in the
not-too-distant future. That makes gold a must-own asset despite its 500+%
advance since 2001.
I've read some analysts claim that these things are
already factored into the gold price. That's debatable, but even if they're
right, what's not priced in are the delayed and
indirect consequences from all those actions...
- What fallout have we experienced from our
growing pile of national debt? The world economy is still functioning
and some say improving.
- What spillover has occurred from our government
spending more than it takes in? My retired parents still get their
Social Security checks every month.
- Is there any negative backlash from printing
all this money? Most would point to rising stock-market and real-estate
prices, both positive things.
The problem is that overindebtedness,
overspending, and printing currency is not all candy, lollipops, and romantic
horseback rides on the beach. It's not free of consequences. We have yet to
experience the full ramifications of how these actions are undermining our
currency. And that won't be a fun or pain-free process.
In this month's issue of BIG GOLD, due out tomorrow, we interview 19 noted
economists, gold analysts, best-selling authors, fund managers, and senior
Casey Research staff – and not one of them believes the fallout from
the reckless monetary policies of governments around the world has peaked.
Most believe the worst is yet to come, with varying degrees of aftereffects.
And they all recommend continuing to buy gold. If you're not reading BIG GOLD, this is the perfect issue to start with…
following the investment recommendations from this highly successful group,
your portfolio will be positioned for maximum effect for 2013 and beyond.
As a free preview, I'll mention that most of the
experts I surveyed believe that the coming fallout will take an inflationary
form. All are concerned. Even those who think deflation is more likely urge
investors to hold gold as one of the best ways to protect themselves for what
lies ahead.
They also point out that while gold stocks have been
disappointing, they represent an incredible bargain at present,
and that while they could get cheaper, the potential upside far outweighs the
downside at this point. I'm also happy to point out that while GDX dropped
9.8% last year, the BIG GOLD portfolio was up 7.8% – and that's
without averaging down, which many subscribers took advantage of. I'm
convinced that our portfolio holds the best gold producers, and most of our
experts name their BIG GOLD favorites.
In the hot-off-the-presses International Speculator, Casey Research Senior Metals Investment Strategist
Louis James names a stock currently on the deep-discount rack that he's
convinced won't stay there for long. The first two sentences from his
introduction were very clear and direct, and spurred me to log on to my
brokerage account and take action.
So, what will gold do this year and beyond? Whatever crazy and unpredictable
twists and turns history takes in the future, gold will still be gold, and
the best way yet devised to safeguard wealth.
The ultimate question then is: what standard of
living would you like to maintain?
Most people would say: "As high as I can!"
That's why we continue to buy gold. And based on our research, lessons from
history, and some of the most successful investors in the sector, we have a
long way to go in this gold bull market
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