⛏ Should I Buy Gold Now?

Greetings Contrarian,

This is another Sunday edition, with your most pressing question. Here's a great one:

Dear Paper-gold-holder,

We will refrain from the over-used and often inaccurate mantra often used by true gold bugs "If you can't hold it, you don't own it." Meaning that unless your ownership is physical gold, you don't own gold at all. Instead we're going to say "Pick a game to play, and play it well". Meaning that unless gold has an appropriate place in your portfolio, your position will backfire.

There's good reason why the old man Buffet doesn't like it: it does not produce yield, so it's inferior to a real business. The reason why people are so adamant about holding physical gold is because, in most traditional gold futures/spot trading, the gold you're buying is simply a representation of the bars they hold in a warehouse on a X to one basis. The X varying up to triple digits.

Against this risk, we would be looking into Sprott's Physical Gold Trust (PHYS) and the Sprott Physical Silver Trust (PSLV) - which are on a one-to-one basis.Every now an again there's a lawsuit claiming [insert your favourite bank here] has manipulated the price of gold and all that happens is a slap on the wrist - small fines, and nod and a wink a disapproving look from the regulators. We may shake our fists at the manipulation, but we wouldn't bet one cent this will change any time soon.

So if the world keeps spinning the same way it always has, gold will rise with commodity cycles, in financial and banking crisis to some level, then decrease in price as confidence returns.

Gold in this case serves as good insurance. Just ask yourself: how much of your portfolio should be insurance versus actual positions?

Unless..... the fact the whole world is on sky-high levels of debt that must be unwound pushes countries to reject the current financial system and gold is completely re-rated. Then, gold will act as a massive winner that will not just protect you but actually bring about massive gains. However, you should ask yourself - what happens if we wake up one day and gold is re-rated at $3000, $5000 or beyond?

What happens to Barrick, Kinross, Newcrest, Franco-Nevada, Wheaton?

Our bet is they'd go up much higher.

Gold is a great form of insurance, but it's not where the leverage is. A world where gold is $10,000 is probably a world where our financial system is so messed up we wouldn't want to live through it.On a complimentary note, time and time again times of crisis have proven to be best weathered by getting off your butt and moving to a more friendly place where you can enjoy your wealth away from the hungriest of tyrants. Whatever plan you have for gold, don't forget to have it easily accessible wherever you are.

And by the way, if your gold stocks have actual ounces of gold in the ground or in a warehouse, you do, in fact, own gold - with some risk and leverage. Don't let anybody tell you otherwise.Also, hedge appropriately.

Happy speculating,

The Editor

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational/entertainment and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.