The case against gold

  • Only you are responsible
  • Why do they spend?
  • The only question that matters

If you own gold and gold stocks, I say good for you. Gold is
up about 10% year to date, and gold stocks seem to be the only bright light
in an otherwise dim stock market.

And as much as I’d
like to take credit for urging you to buy gold and gold stocks – it’s
ultimately your choice, your responsibility and your glory for your
investment success.

But today I want to discuss the arguments surrounding the
very fiscal policy that has so far allowed gold to make strides higher as
world currencies continue to fall.

As I type, the Federal Government is no doubt pondering
another massive stimulus package. Whenever the government asks the question
“To spend or not to spend” the answer is almost always “spend, and if that
doesn’t work, spend some more.”

It’s an answer that
comes easily, and not just because the Fed is run by unelected officials -or
because spending is easier than listening to constituent groups complain that
you’re not spending – the simple truth is that the spenders have a
cut-and-dried theory of economics on their side: Keynesianism.

Keynesianism is the answer to: how can we spend much more
than we earn?

And since this fiscal experiment is absolutely of the
Keynesian variety, it’s tough to imagine that it won’t continue playing out
to script. That is, I’m waiting for President Obama to announce another leg
of “stimulus spending” any day, week or month now.

At the risk of repeating the obvious mantra that I’ve been
chanting with monk-like regularity, inflationary policy is good news for
people who own gold (and silver, and practically every other

To see the current debate about whether to spend, or not, I
recommend taking a look at this youtube video, and the two others in the

Not to spoil the ending, but the videos feature Paul Krugman
waving the Keynesian banner for more spending, today, tomorrow and possibly
yesterday if we ever invent time travel.

On the other side is Niall Ferguson, a Harvard business
school professor who suggests that instead of spending more, maybe we should
spend less, rein in our debt, pursue tax reform and generally balance the
Federal Government’s checkbook before the whole system goes up in
inflationary smoke.

You know who I agree with – but I urge you to watch the
videos and make up your own mind. If you’re convinced by Krugman’s arguments,
please do me a favor and send me a note explaining why at [email protected].

In any event, new spending measures will only cause gold to
go up in price, and gold stocks to continue skyrocketing.

The question you
have to ask yourself isn’t who is right or who is wrong, necessarily. The
question is: how can you best position yourself to benefit, or at least not
suffer the consequences of Keynesian policy?

The answer is to buy more gold, silver and relevant

For those of you looking for an alternative to the SPDR Gold
ETF (NYSE: GLD) I’d recommend looking into Perth Mint
Certificates through

These certificates allow you have ownership of real gold,
stores in Australian vaults. It’s a little pricey to open an account
($10,000) but it’s a relatively inexpensive way to own physical gold without
taking delivery.

Another (cheaper) way to do so is to open up an account on This site allows
you to buy gold by the gram with no minimum or maximum purchase.

The gold is allocated in insured vaults in Zurich, Hong Kong
and London, and is subjected to regular external audits – unlike GLD.

You can buy and sell your gold through their site or even
take delivery for a small fee.

Buying gold and other precious metals through these firms
gives you the protection of world-class vaults as well as keeping your wealth
far away from the Federal Government.

Good investing,

Kevin McElroy


Resource Prospector

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