Gold Investing: $2,400 An Ounce?
The Dynamic Wealth Report
July 22, 2011
by Justin Bennett, Editor
I know, I know… another article about gold.
You’ve probably read a hundred articles on the yellow metal in the past
month. And I’m sure you're wondering why you should read this one.
Well here’s why…
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Recent data suggests gold’s epic bull run is actually gaining steam. And
if you don’t already have some gold stashed away, what I’m about to tell
you may have you running to your bullion dealer to pick up whatever you
can afford.
Now, maybe you think gold’s too high to buy at $1,600 an ounce. Or maybe
you feel gold is a “barbaric relic” with no use in a modern economy.
Well, that’s the same argument gold bears have been making for years.
And for years they’ve been dead wrong.
After all, gold’s been on a steady move higher for over a decade now. In
fact, since 2000 the precious metal is up a staggering 450%. Not bad
considering the S&P 500 turned in a gigantic goose egg during the same
time frame.
Clearly, gold has outperformed equity investments as a whole since the
turn of the century.
Alas, that’s water under the bridge…
The real question is… “Is it too late to invest in gold?”
To help you make that decision, let me throw a few facts your way. Maybe
then you can decide if gold is right for you.
First of all, the World Gold Council recently reported central banks
bought more gold in the first half of 2011 than they did in all of 2010.
That’s interesting considering central bankers were net sellers of gold
up until 2008.
Maybe they’re finally realizing their global money printing campaigns
are getting out of hand.
Speaking of money printing, do you realize the US monetary base has
increased more than 200% since September 2008? Meanwhile, gold rose a
mere 70% over the same time period. Put in those terms, gold still has
serious catching up to do.
And let’s not forget China…
The country is having a heck of a time controlling inflation. In fact, a
recent reading came in at 6%. That’s well above the 4% rate China’s
government is shooting for. That has Chinese investors buying up record
amounts of gold.
How much you ask?
Well, for the first time ever, Chinese gold demand outpaced the combined
total of developed Western countries in 2010.
In other words, add up the demand from France, Germany, Italy,
Switzerland, the US, and the UK. You’ll find China demanded more gold
than all of them put together last year. What’s more, many analysts
expect the Chinese demand trend to accelerate in coming years.
And finally, if you’re still concerned gold is overpriced at current
levels, consider this…
Gold still isn’t trading at all time highs in inflation adjusted terms. Yes, gold is trading at all time highs in nominal terms. But when you
take inflation into account, it’s not even close to surpassing the old
record.
In fact, gold would have to rise to $2,400 an ounce to match the 1980
inflation adjusted high. That’s another 50% upside from the current
$1,600 an ounce investors are paying for gold.
Think of it this way…
Which do you think will happen first? Will the Dow Jones Industrial
Average rise to 19,000 or will gold rise to $2,400 an ounce? Both
require a 50% jump from current levels.
Past performance is no guarantee of future results, but I’ll put my
money on gold. And I think it will happen within the next two years.
Now let me be clear…
I’m not trying to tell you there aren’t big profit opportunities in
stocks, because there are… lots of them. My point is, you should have a
portion of your investment portfolio in gold.
*** Editor's Note *** In the last 12 months, one
group of special stocks has outperformed the Dow by nearly 40%. If
you’re wondering how to substantially grow your money, investing in this
area may be the answer.
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• Coverage was initiated on Newpark Resources
(NR) at BB&T Capital Markets this week. They now have a buy rating on
the stock. The US oil services company is growing their market share in
drilling fluids.
• Williams-Sonoma (WSM) was upgraded to “outperform”
from “neutral” by Wedbush. They must see continued strength in the
upscale consumer discretionary sector.
• Wunderlich upgraded Riverbed Technology (RVBD) to a
buy rating yesterday. The company just missed Q2 revenue expectations,
but they beat handily on profits.
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