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Why Owning Gold Is More Important Than Ever

Written by Brian Hicks
Posted June 25, 2012 at 4:47PM

Last week I conducted an unscientific poll at the Angel office.

I sent around a quote regarding economic collapse, hatred of bankers and capitalists, and the blame game.

My request was simple: Do you agree or disagree with the following quote — and do you think it adequately represents the sentiments of the current 99% movement against the 1%?

It was nearly unanimous: Everybody agreed in one way or another with the core message and the spirit of the quote.

And everyone I polled agreed it represented the current anger the 99% harbors toward the 1%.

Here’s the quote:

"And if we ask who was responsible for our misfortune, then we must inquire who profited by our collapse. And the answer to that question is that banks and stock exchanges are more flourishing than ever before."

I then asked my employees to guess who said it.

The answers I received ranged from filmmaker Michael Moore to actors Sean Penn and Alec Baldwin to Obama, Romney, and FDR...

Not even close.

This Occupy Wall Street-esque sentiment was uttered by Adolph Hitler in April 1922.

Once the origin of the quote was revealed, most of my employees became uncomfortable — and began to backtrack on their responses. But that didn’t stop them from trying to “qualify” the message...

The anger is still real and valid. But the person who said it (Hitler) is wrong.

Of course — but my point here is that we find ourselves in the same kind of environment that gave birth to the Hitlers, Maos, and Stalins of the world.

And when these monsters are born, they immediately go after easy-to-blame targets: the wealthy.

You would do yourself a favor to read (or reread) Greg McCoach’s piece on “Being Prepared” and surviving the coming economic collapse that we published in these pages two weeks ago.

As always — and much to Uncle Warren’s chagrin — we’re recommending precious metals and resource stocks in these chaotic times.

And I will admit it hasn’t been easy lately...

The resource markets continue their downward slide with the benchmark TSX Venture exchange now down 50% from its highs a year ago. As expected, some individual stocks have been hit even harder.

If you're new to the sector, this is precisely why it’s well-known as the most volatile group of securities in existence. While the gains can be breathtaking on the way up, the losses are staggering when the cycle turns downward.

Like a few spoonfuls of fertilizer in your morning coffee, it's not a pleasant experience...

cdnx_daily

Unless, that is, you've got your emotions in check and you understand that now — during these grinding selloffs — is when the seeds of fortune are planted.

One of the most important things to understand — regardless of what market you're in — is fundamental analysis.

The masses typically want to buy when fundamentals are deteriorating, which means prices are rising. And they want to sell when values are most compelling, or when prices have dropped.

This is why we talk about taking gains when the future looks bright and being ready to buy when it looks like the wheels are coming off.

There's a good chance we'll see continued weakness in the sector, especially for those companies that need to finance, to raise money, in order to keep projects alive.

Remember to keep your shopping list close at hand. Get your mind right and be ready to buy.

Another sector we're keeping a close eye on is the gold and silver majors. These are the senior-listed companies that actually mine the metal.

You can see by looking at a chart of the HUI that these stocks have put in a bottom:

huidaily_chart

Many of the majors are trading at huge discounts relative to gold itself and are cheap in absolute terms as well.

I was talking with a trader friend of mine yesterday — in particular about the relationship between gold and gold stocks.

They're two different animals, but you can learn a bit by comparing relative value... for instance, the amount of gold you get when buying shares in the miners versus the cost of gold itself.

My friend went on to say that a thousand dollars gets you roughly 0.6 ounces of gold, while a thousand-dollar investment in Goldcorp would yield four ounces.

There are a handful of majors trading at similar discounts to the metal.

We're not ready to jump in yet, but the gold stock trade looks to be setting up nicely, so stay tuned...

A legendary buying opportunity might be getting close.

The original bull on America,

Brian Hicks Signature

Brian Hicks

Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy & Capital. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.



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