Gold Hysteria Leads To Precious Metal Hoarding (GLD, SLV)
The Vietnamese government just banned free market trading of gold bars within the country.
This comes just days after Egypt announced that it has banned gold exports.
As precious metals like gold and silver soar amid economic imbalances, the reasons to own them, and the stocks of companies that mine them, become even more compelling.
This morning I was speaking with Kevin McElroy, Editor of Wyatt Investment Research's Resource Prospector e-letter. He had a few choice words regarding gold that I'd like to share with you:
"You can’t eat gold. Gold produces no income. Gold is just a worthless barbaric relic. It’s an expensive paper weight.
Gold doesn’t do anything.
You hear these statements as criticisms against gold. But they just don’t jibe with reality. I can’t eat coal, but no one denies that coal has any value or use.
My car produces no income, but no one makes fun of me for owning one.
So what does gold actually do? People who own gold understand that it preserves capital. Sure, you can nitpick slim periods of time when buying gold would have lost you money – but those times are few and far between. They typically follow some of the biggest run-ups in gold’s price over history.
But besides these things that gold owners know – there are a few big questions that need to be answered. Like, for instance, if gold has no value, no use – if gold is a barbaric relic, and if gold doesn’t do anything…
Why then, would Egypt ban ALL gold exports as they did over the weekend?
Notice, Egypt didn’t put a ban on cash leaving the country. They didn’t ban oil exports, or camels or widgets – they banned gold!
Here’s an excerpt of the entire story from Reuters:
“Feb 27 (Reuters) - Egypt has issued a ministerial decree immediately banning the export of gold in all its forms, including jewelry and ornaments, until June 30, the official news agency MENA said on Sunday. This decision, which comes in light of the exceptional circumstances the country is passing through ..., is to preserve the country's wealth until the situation stabilizes..."
If gold has no value, if gold has no use, if gold is worthless…why would Egypt ban its export under the guise of preserving the country’s wealth?
To reiterate the point, the Egyptian pound is still free to leave Egypt’s borders. The government doesn’t care about the fiat currency, only the gold one.
Learn this lesson now: when times get tough, governments don’t care about paper money, but they do care about gold.
Today, it’s still legal to take gold out of the United States. You might be thinking, “It couldn’t happen here.” Well, it certainly could happen. Is it likely to happen? I don’t know.
But if it does happen – are you prepared?"The hysteria over precious metals has lead to soaring prices: yesterday gold broke out again to trade above $1,400 an ounce. Here's a five year chart of the SPDR Gold Shares ETF (NYSE: GLD):
Silver, also known as the poor man's gold, is posting even more impressive year-over-year performance. Yesterday it reached multi-decade highs over $34 an ounce. Again, check out this five year chart of the iShares Silver Trust ETF (NYSE: SLV):
We weren't specifically expecting that Vietnam would ban gold bar trading, and that Egypt would ban exports when we put together a special report highlighting the reasons, and specific stocks, to play silver's historic run.
But we did forecast higher silver prices for the foreseeable future. I don't think this trend will reverse anytime soon. I’ve put together a report on a region of North America that’s poised to deliver some of the biggest silver profits of anywhere in the world. It’s a narrow band of mountainous country called the “Sierra Madre” region. You can access the Sierra Madre Silver report here.
Disclosure: Ian Wyatt owns shares of GLD and SLV in his personal investment account.
