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1,600 Reasons to Buy Gold Now

Gold fell by 28% in 2013. That's a huge reversal of a decade-plus trend.

Between 2001 and 2012, gold managed positive gains every single year, a track record unmatched by any major asset.

The precious metal went from a low of $255 in April 2001 to a high of $1,900 in September 2011, for a peak return of 745%.

Since then, gold has given back 35% from its $1,900 high, leading many to call the end of the gold bull market.

But is it really finished?

By looking at history and numerous indicators, I've found a different story.

One that will jumpstart your 2014 profits…

Simple Economics Guarantees a Gold Rally

Fundamental drivers for gold are so numerous I hardly know where to start.

Unprecedented quantitative easing (money printing) and ultra-low interest rate policies imposed by central banks – especially in the United States, Japan, Europe and China – are in the news every day.

Here are several others that aren't grabbing headlines yet, but shouldn't be ignored.

drilling activity chart Shuttering Operations: It's no secret that falling gold prices have made numerous mines unprofitable. That's pressured management at those mining companies to rationalize their operations. Producing gold at a loss doesn't make for happy shareholders.

So mines are being put on care and maintenance, seriously cutting into gold production worldwide. Evy Hambro, who manages BlackRock Inc.'s $8 billion World Mining Fund, said gold supply could fall "quite rapidly" as producers restrict output at higher-cost mines.

Fewer Discoveries: Lower gold prices have meant, of course, lower profits. So, miners are cutting back
on expenses that aren't immediately accretive, affecting the development of mine expansions, new projects, and exploration. That's inevitably going to mean fewer ounces available to mine in the near and medium terms than would have been the case without this gold price rout. There were half as many drills looking for precious metals in the first 9 months of 2013 versus 2012.

largest gold operations

High-Grading: In response to lower prices, gold miners have resorted to mining higher-grade ores while leaving behind low-grade ores. That allows them to be more profitable on ounces produced this way, but it means much higher prices will be needed to go back to the lower-grade ores. In some cases, these may never even be mined out at all.

Physical Asian Buying: Asia loves gold, and that trend continues. In the first nine months of 2013, India and China together had bought 1,500 tonnes (1,653 short tons) of gold, easily dwarfing Western purchases. When Indian, Chinese, and central bank buying are combined, they account for nearly the entire annual world gold production.

Overall, gold fundamentals have not only remained intact, they've continued to improve. So it's easy to project them to push higher gold prices in the future. They've got the laws of economics behind them…

gold demand in china

Gold Hits the Same Bottom – Twice

An important part of technical analysis involves analyzing price action. And gold's had plenty of that over the past year.

Most significant was the massive price drop in mid-April when a black swan crash-landed on the gold market.

Over just two trading days, gold futures prices shed 13%, falling from $1,575 to $1,375. That $200 cliff dive was the largest two-day drop in 33 years.

By late June the price had fallen further still, to $1,180 per ounce. So far, that's been the low.

Recent news of the Fed's QE tapering again weighed on gold in late December, causing it to momentarily drop to $1,182, then immediately reverse upward by $32.

While it's still early to say for sure, that may have been a "double bottom" – dropping twice to the same level without moving further down – hit in June then in December. This increases the chances that the $1,180 level is the low for gold prices in this drawn-out consolidation process.

Join the conversation. Click here to jump to comments…

About the Author

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

Read full bio

  1. Deborah G | January 14, 2014

    If you liked Gold at $1900 why wouldn't you like it at $1200+/- ? The fact is stashing a little yellow stuff on a regular basis won't hurt a bit. I promise

    • Robert in Vancouver | January 14, 2014

      I agree with Deborah but I am having a hard time thinking gold will go up faster than the US Dollar, at least in my lifetime.

      It's an ugly perversion, but the almighty US Dollar seems to be blessed by God Himself, and is more valuable than gold, oil, silver, copper, nickel, wheat, beef, and all other commodities.

      And the more US Dollars that are printed and wasted on vote buying schemes, the more valuable those dollars become.

      • anonymous | April 2, 2014

        Your wrong the dollar is going to collapse, it holds no value at all soon we will be a third world country because we have printed so much. AND FYI god doesn't exist. Rothschild Illuminati and Military are destroying This World. Wake Up!!!!!

        • Walt | April 27, 2014

          You are correct when you said that the U.S. Dollar will eventually collapse. You are also correct when you said that the Rothschild Illuminati are behind this scheme to collapse our currency. The Illuminati are the One World Government. But you are completely wrong when you said that there is no God. The God of the Holy Bible is alive and well. His only begotten Son, Jesus Christ, died on the cross for our sins. The only way to the Father is through the Son. Holy Bible John 14:6 . The only way to the Son is through His shed blood at Calvary's Cross. Wake up !!!! There is a God. Who do you think provides the air that you breath to stay alive ??? Rothschild ??? I don't think so. Only God – who created the entire Universe and everything in it. Walt

      • Walt | April 27, 2014

        Robert: Please believe me – the Almighty U.S. Dollar is dying. This year, 2014, I prognosticate that there will be a Global Currency Reset. The IMF is pushing for it and the Global Elite ( One World Government) is behind it. When this happens (and it will), the U.S. Dollar will lose it's current status as the "World's Reserve Currency." The dollar will be DEVALUED by 30%. This will be the beginning of the end. The stock market will tank, as people exit in droves. Where will they put their money ?? Gold and Silver. And other hard assets. Walt

    • DW | January 14, 2014

      What do you think about Silver stacking?

  2. Nigel | January 14, 2014

    Hello Peter,

    Am in full support of your advice on gold today. Would you agree silver can benefit in exactly the samsame way, or possibly it offers an even better scenario(?)

  3. fallingman | January 14, 2014

    It's ironic. THE REASON TO BUY GOLD IS THE SAME REASON NOT TO BUY IT. A rising price threatens the monetary authorities.

    The reason to buy is to protect yourself from their depredations.

    The reason not to buy is that they'll do and are actively doing everything in their power, including criminal manipulation of the futures market, to keep the price from rising. It's worked so far, but the London gold pool suppression of the 60's worked too…until it didn't, and then prices shot up.

    Expect a repeat, but don't hold your breath. There's simply no telling when physical outflows from Western coffers become so great that the manipulators throw in the towel and say, "No mas, we can't sell every ounce of gold we have we have."

    The difference this time, as Peter pointed out, is that they're printing gold. Well, not gold exactly, but claims on gold. In the 60's, they weren't imaginative enough or capable enough yet to run a derivatives-based Ponzi scheme where 92 paper claims are sold for every ounce of deliverable gold.

    Why'd they suppress the price this way this time? Because they could! And because there's no way they have the physical gold in sufficient quantities to keep the price suppressed via straightforward sales of bullion. That's so old school. Now, they just sell more "gold" naked short, and as long as only a few call their bluff and demand delivery, it's all good.

    But what happens when the next event comes along to call the integrity of the system into question and more than a few people want the real thing…now? Well, then, it should get really interesting.

    Only a matter of time till the Ponzi unravels and derivatives holders are left holding the bag, ie., electronic promises entitling them to gold that can't be delivered vs. holding actual gold. Looking forward to watching that scandal unfold.

    Buy anytime in here, AND muster up all the patience you can. You may not need it. Things can happen fast. The dam could break tomorrow, but it could be a long drawn out affair too.

  4. DW | January 14, 2014

    Please do not forget Silver!! The transfer of wealth is coming, so keep on stacking!!!

  5. Kevin | January 14, 2014

    Also I believe that they don't most people to own precious metals because when the central banks declare that all the countries can't pay back what they owe,then all currencies will be worthless and the central banks will own all countries and and start a currency owned by them,so precious metals will be still worth something;but won't happen until the central bankers will have there own banks in Iran and North Korea

  6. Donald C Wanner | January 14, 2014

    Thank you

  7. H. Craig Bradley | January 14, 2014

    REASON NOT TO BUY GOLD

    Gold prices have not bottomed-out yet. To sustain a bull move upward again requires wage inflation and increasing general inflation, as well. Inflation "expectations" in future years might cause long rates to go up a bit from here. Neither conditions exist at this time. M2 Money Velocity is at a multi-decade low at this time. In fact, we have a record low labor participation rate with a still sluggish economy . A catalyst is needed such as a trend of a weakening U.S. Dollar on the foreign exchange (FX) market or a crisis of some kind ( Middle East War) to cause a near term stampede back into gold as a safe haven once again.

    • northwind | January 15, 2014

      I think it's a good idea to have some gold before the stampede starts not after. get some, put it away, and go on with your other investments.

  8. H. Craig Bradley | January 14, 2014

    Kevin:

    That may just be it! U.S. BANKERS want to move into the Islamic Republic of Iran and gain control of their finances. A war may first be needed. Do you think the whole issue of a Iranian Nuclear Program is trumped-up a bit to justify a first (preemptive) strike against Iran by Israel? It may be that the ultimate goal is to nuke Tehran and turn Iran and the Mullahs into a 4th world rubble pile someday. ( The Flintstones). North Korea is a bit more complicated because China firmly controls Korea.

  9. GERALD | January 14, 2014

    Why do we wait for the COMEX failure to deliver gold to see the dollar spot price of gold go up? We have already seen that the NY Fed could not deliver Germany's gold. It seems to me that whether the dollar is moving through the economy or not, there are plenty of them – and the amount of gold continues to be finite. Is something else holding the spot price of gold back?

  10. ROLF LOTH | January 15, 2014

    Gold and Silver prices are manipulated by the criminals at J P Morgan, BofE and the derivatives market. The physical market is shrinking, so eventually, the cows come home and not everybody lining up for milk will get it. Perhaps somebody will invent a way Gold and Silver can be created on a 3D printer…

  11. H. Craig Bradley | January 16, 2014

    WIDESPREAD COUNTERFEITING KEEPS GOLD IN THE VAULT

    There is lots of counterfeit bouillon coins, both silver and gold, out there. Tungsten gold fake bars can look like the real deal and have about the same weight. It takes some sophistication to determine if a piece of gold or silver is authentic or fraudulent. You can no longer just do it easily on the street. Nobody would transact in precious metals on the street without the facilities (equipment) to first determine authenticity. This will insure precious metals are not widely used in direct commerce. You have to have workable controls in place to prevent counterfeiting. Gold does not have them for everyday commerce.

    • fallingman | January 20, 2014

      That's kind of a silly comment. Silver coins would be the obvious choice for commerce. Do you think anyone is counterfeiting pre-65 dimes and quarters?

      Uh, no.

      So, silver coins will work just fine as money in the event of a fiat currency meltdown. And while gold won't work all that well for many reasons…only one being that you'd have to assay it to determine its purity with 100% confidence…it will still work. The main problem is divisibility. What are you gonna do with a one ounce gold coin in a world where the clownbuck has lost say 90% of its current value in relatively short order, people stop accepting it in payment, and you need food or a cord of wood or a tank of gas and all you have is an ounce of gold. That'd be like taking a $5,000 bill to a convenience store and expecting them to make change.

      Gold will be good for larger transactions and will serve as a store of value till monetary sanity returns to the system, but it'll be clunky as a currency.

      Not so silver. Pre-65 silver coins are the perfect choice for currency when paper fails. As if someone would want to assay a silver dime for purity before accepting it. That's absurd.

      You can't lump the "precious metals" together in this regard.

      And if not silver, then what would be used. Liquor? Yeah, probably. Shotgun shells? Yeah. Food? Sure? Those can and probably would all be used, but they're all MORE problematic than silver and therefore are inferior choices. Try making change for a cow when all you want is a pair of boots.

      Silver has been used as money for millennia for a reason…several reasons. Do you think there were ever issues with determining purity and weight back in the day? Yeah. Did that keep the coins from circulating? No. Case closed.

  12. Martin | January 18, 2014

    Over the next few years people will need cash more than gold as they continue to earn less and shy away from debt. There's no end in sight for the decline in gold prices yet, so there's no rush to buy it.

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