The outperformance of gold as an asset class is what keeps investors flocking to the metal. Yes there have been volatile periods when price has sparked lower, but overall gold has consistently outperformed both stocks and bonds over the past 12 years. As the increase in liquidity at the hands of the Fed has kept both stocks and bonds afloat, their appeal has been illusionary as the chart below (courtesy of Datastream, Ertse Group Research) shows.
The left-hand scale shows the ratio of the MSCI World equity index to gold, while the right hand scale shows the ratio of a total return index of 10 year treasury bond to gold. When the ratio’s are falling, gold is outperforming. This means that the relative strength in gold is still present as both ratios are setting lower highs and lower lows which is the very definition of a downtrend. Holding physical gold should be encouraged until a significant reversal in this trend becomes apparent. As long as the government continues to pile up debt, this trend should continue.
So how does the government try to solve the current debt situation? By issuing more debt, of course!
Ed Note: Another Item from Mark’s 19 Page VR Gold Letter which you can read more about HERE:
Egon von Greyerz of Matterhorn Asset Management gold King World News, “The printing of money will lead to collapsing currencies, and investors buying gold at any price.” He added that “the paper markets will not be trusted” because “there is a distrust in the government’s ability to govern, and there’s a distrust in the financial system. We will continue to have failures like Lehman, MF Global and PFG. They will be much bigger and people will start to realize the banking system is not safe.” “So people will rush into physical gold. I see gold reaching $3,500 to $5,000 in the next 12 to 18 months. Within 3 years, I see the gold price reaching at least $10,000.” More specifically, he believes “silver will outperform gold. It looks like the upward correction in the gold/silver ratio is finishing here, which means that silver will start going up a lot faster than gold in the next few months. I don’t think it will be long before silver goes back to $50, and in the next 12 to 18 months we will be well above $50. In a world where most assets will rot, it’s critical to hold assets that won’t decay and that is gold and silver. And they have to be held in physical form.”
Ed Note: As you might know Mark Leibovit is one of Michael Campbell’s favorite analysts and here’s a good reason why. I get all of Mark’s services, and one thing stood out glaringly in his VR Trader Platinum service. Of the 31 recommended stocks that Mark has liquidated since June 4th/2012 81% of them were closed at a profit. The 6 that were closed at a loss, the losses were very smalll, specifically -.12 cents, -8 cents, -7 cents, -.30 cents , – 2 cents and a “big” -$1.25 on a $39 stock. Moreover of the 8 stocks Mark is currently long, only one is showing a loss at today’s close of – 6 cents.
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