Gold is Now a Steal

Friday, 06 June 2014
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Published in Gold Investing
Gold is Now a Steal PhotoDune.
Poor gold. It’s been dissed, disdained, and scorned for a year. Even worse, it’s been sold off! In 2013, the gold price slumped 28%. Investment pundits are now warning against it. The yellow metal has become the Rodney Dangerfield of investments. It gets no respect. Late last year Scott Nations told CNBC that he wouldn't buy gold with his worst enemy’s cash.

Fiscal-Cliff

Since Nations’ badmouthing of it, other conventional analysts have not been too kind to gold. Should you be deterred by this? Not really. Gurus who profess to follow the markets usually do just that — they follow markets. They’re fair-weather friends of particular investment classes, who are good at letting you know what just happened. They’re good at the game of "gotcha!" I suspect they play this game to distract you from the many times they've been wrong.

Perhaps it’s time to look in other quarters for a more circumspect take on the gold market. We humbly suggest you look to the criminal element in society. Seriously! Now don’t get cynical. We’re not suggesting you go off on a tear about the Federal Reserve Board of Governors. Nor are we suggesting you impugn the dignity and reputation of large European banks (even though some of them have recently copped a guilty plea for price rigging or conspiracy to aid tax evasion).

Pumping money into the European economy can only serve to depreciate their currency and, in turn, bolster the price of gold.

We’re suggesting you take a look at the criminals in the trenches — you know, the guys they make movies about, the guys with masks and guns or high-tech devices to blow a safe; in other words, gold and jewelry thieves. Let’s get real. If burglars break into your home, what’s the first thing they look for: certainly not your grandmother’s cheesecake recipe; heaven knows, not your air conditioner or high school yearbook. Cash, most definitely. But gold or jewelry, better yet.

Consider the case of Hong Kong businessman Zhao Jingjun, who opened a container of gold in front of his buyer only to discover that much of the gold he ostensibly packed had been switched with worthless metals. A senior officer on the case made the point that, at a price tag of $270 million Hong Kong dollars, this gold heist was Hong Kong’s biggest in a decade.
What’s curious to me is that span of time — a decade — roughly parallels the cycle of the most recent gold bull market. Maybe it’s just coincidence, but the thieves knew enough to make this big a steal just as the price of gold tanked. The yellow metal got all the press and attention in its heyday (2001-2012); now the thieves would be offering the haul to fences at a market-discounted price that the fences couldn't refuse.

Coincidence? We don’t think so. Consider this “sophisticated heist” right here in the US on the same day as the Hong Kong heist. In other words, the best time for a criminal to sell his gold to a fence looking for a quick turnaround is the best time for you to buy.

No need to bolt. If your sensibilities require more mainstream signals, you can feel confident they’re there too. European Central Bank President Mario Draghi has announced a new monetary stimulus policy. Pumping money into the European system can only serve to depreciate European currency and, in turn, eventually bolster the price of gold.

Also, the fact that the price of gold held firm today after the Bureau of Labor Statistics announced the country added 217,000 jobs to the its payrolls is a very strong sign. This would suggest that prudent investors are thinking the market’s declined enough for the time being.

Time to buy gold? Take your signals from the BLS, the European Central Bank — or from criminals around the world. The message is the same. Can you dig it?

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