Why the Urgency in 
Fully Allocating in Gold and Silver?

    

Q: Jay, you've been recommending for a long time that people diversify their assets and put around one third of their net worth in gold and silver. On March 16, when you were asked about how to accumulate gold and silver, you recommended buying it in intervals as the price goes down below 900, 800, etc., but that if gold trades above its previous peak of 1000 to finish accumulation (See A Strategy for Accumulating Gold and Silver.) However, recently you recommended that people who are not holding 1/3 of their net worth in gold or silver go ahead and fully allocate before July 5th - even though gold is currently around USD920/oz. Can you explain why you have changed your recommendation at this time? A: It mainly has to do with what my experts have been saying recently. Fred Hickey wrote, "I've been thinking that the next central bank-generated bubble could be in precious metals ... Clearly the economic environment is ripe, with the dollar under pressure, central banks wildly printing money and building concerns about severe inflation ... the innovation in the precious metals market is the World Gold Council's establishment of gold ETFs. These ETF's removed the past barriers to buying gold ... With one click of a computer key, one can now own as much gold one wants. It's stored and secured for you, for a relatively minor annual fee. No hassles! This opportunity has been opened to investors all over the world ... I've never felt more strongly that everyone should own some gold in their portfolio ... History shows that fiat-based currencies do not last. Their value is destroyed when the supply "rapidly increases." Jim Rogers said that he's buying gold and silver since nobody can get a loan to open a mine, and silver since it's 75% below its all-time high. (See Jim Rogers' Interview in India - How to Prepare for High Inflation.) Richard Maybury quoted Doug Casey, "The only financial asset that is not at the same time someone else's liability is gold."  Maybury went on to say that gold and silver coins are insurance, and it's important to have some.  He also believes that China has already secretly bailed out of the dollar via a lot of front companies that have purchased assets in foreign lands with long term contracts denominated in dollars.  He believes that this is why they are making remarks that could trigger a panic to get out of dollars.

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• Richard Russell wrote, "The Bernanke Fed is trying desperately to bring back inflation, and devaluing the dollar is the surest and quickest way to inflate.  Our defense against government idiocy is gold.  I believe that what's coming is a worldwide panic to own gold.  The panic has not started yet.  But it's coming, and the panic may be just starting via China and Germany.  Actually, I think the Chinese are looking ahead to a devalued dollar ... Germany was literally wiped out in the 1920s by hyper-inflation. As a result, the Germans still retain a great fear of inflation." He shared a June 17th Times Online article, Germans flock to gold bars vending machine at Frankfurt airport, which reports that a due to rising demand for gold, a company, Gold to Go is installing vending machines that sell 1g, 5g or 10g of gold at around 20% above market prices. Russell wrote, "The venture ... aims to build on the soaring interest in gold ... It's natural. I look for this concept to be adopted by other nations."
   
• Jim Sinclair wrote, "There is no better proof that we are getting extremely close to the Armstrong/Alf point of lift off (in gold and silver prices) than the violence of the shorts in their desire to cover both in paper gold and the long suffering junior gold shares. The method used is to increase the short position now while we are waiting for the uptick rule to be reinstated all while driving a bulldozer of selling into markets ... In my opinion we are very close now to the best and longest move upwards in the gold market. Gold is going to $1650 ... Get done whatever you plan to do now as a bottom here." Sinclair has set July 5th as the absolute latest date for the breakout to occur. Of course, he could be wrong, but I want to be at least fully allocated before that date. He has made many good calls in the past. (For more information, see http://jsmineset.com/ or Jim Sinclair Bets a Million Dollars Gold Price Will Hit $1650 before the 2nd Week in January 2011.) 

Q: Do you know what prices Armstrong and Alf predicted? 

A: I don't remember exactly. He quotes them fairly often. I believe Alf was $3,500 minimum, and Armstrong was in the $6,000 to $10,000 range.

Q: Why July 4th?

A: It's based on Sinclair's technical studies (which I know nothing about). I just chose July 4th to be sure we were ahead of it. Technically, July 3rd would be the last trade date before his date. Adjusted for "official" inflation, the 1980 top in gold (850) would be $2,300 today. Much higher using true inflation. We have a bargain value, which can protect us for years to come. When this next leg up gets underway, there is such a tiny supply of gold, silver and mining shares, the increase in market price could be completely unimaginable.

Q: This is a very short period of time, and some people are quite busy. What if a person cannot fully allocate in physical gold in silver before July 4th?

A: I only have one recommendation now. If I didn't have 25-33% of my net worth in silver and gold, I would buy GLD, or SLV, or both within a week to make sure I had 25-33% in gold and silver. It is an unbelievably simple way to get a position. Then I would worry later about getting it into the form and location I wanted. JUST GET ON BOARD! 

Q: How about gold and silver mining stocks?

A: When this next leg up gets underway, there is such a tiny supply of gold, silver and mining shares, the increase in market price could be completely unimaginable. If you don't already have 10-17% of your net worth in these, then I recommend GDX, a basket of blue-chip gold mining stocks and some junior gold mining stocks, and SSRI, which I believe has tremendous potential for a silver stock (see SSRI - A Rare and Unexpected Opportunity) and other mining stocks I own (see Jay's Portfolio.)

Q: Is there risk? We're talking about 35-50% of our net worth in gold, silver and gold and silver mining stocks?

A: Certainly. You cannot avoid risk in any investment. Investing is all about minimizing risk and maximizing profit potential. I consider it a greater risk to not own gold and silver than to own it. I do not want to miss the next major move in gold. Even if Sinclair is wrong on the timing and gold goes down to $600-700/oz, the downside is only 20-30%, and that is only short-term. I do not recommend trading gold and silver but rather holding them long term until they become bubbles. If gold jumps to $1,650 in the next 3-12 months, as Jim Sinclair thinks, then that's already a 77% gain. The bottom line is whom you trust. I already decided on this years ago based on many years of trial and error and asking God to guide me to men I could trust - men who care about the little guy, who have a proven track record and who believe in honest money - money based on something tangible, like gold or silver, not something that can be created out of thin air (see Whom to Listen To.)

Articles and Videos for Further Study

• Germans flock to gold bars vending machine at Frankfurt airport (Times Online, June 17)
• Washington is unable to call all the shots (Financial Times, June 15)
• Gold sold like chocolate from German vending machines  (The Telegraph, June 17)
• China sells US bonds to 'show concern' (Breitbart, June 17)
• Merkel For the Fed (Wall Street Journal, June 4, 2009)
• Resurgent Russia Discharging Dollars (Goldseek, Trace Mayer, June 3)
• Chinese Students Laugh Loudly at Tim Geithner (The Telegraph, June 1, 2009)
• China and Brazil: Dump the Dollar (BusinessWeek, May 19,2009)
• Jim Sinclair on the Inflation / Deflation Debate (YouTube)
• Jim Sinclair Bets a Million Dollars Gold Price Will Hit $1650 before the 2nd Week in January 2011 (Goldprice, April 2, 2008)
• Inspector General for the Federal Reserve Doesn't Know Where the Money is Going (YouTube)
• Money, Banking and the Federal Reserve (Ludwig von Misis Institute)
• Federal Reserve Secrets
• CNBC Interview: Jim Rogers says abolish the Fed
• Capitalist Conspiracy
• America: Freedom to Fascism
• Fiat Empire