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.
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.
For this month's issue of BIG GOLD, we interviewed 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.
