In the past six months, the price of an ounce of Gold has fallen from over $1,790 to below $1,590 – a 13% decline that has disconcerted many owners of the Precious Metal. The mainstream media attributes the pullback to improvements in the economy, and the possibility that the Fed’s stimulus measures will come to an end. Reuter’s reports (“Gold falls on optimism over US economic improvement” by Frank Tang and Carole Vaporean, March 13, 2013):
“Gold came under pressure after data showed U.S. retail sales expanded at their fastest pace in five months in February. The report came on the heels of strong gains in employment and manufacturing, increasing chances the Federal Reserve might halt its bond-buying earlier than thought.”
To gain some insight into how investors might view this decline, I spoke with Eric Angeli, an Investment Executive at Sprott Global Resource Investments Ltd.
Eric says the motive for owning Gold remains intact.
“Wall Street may scoff at the archaic metal because it won’t generate them a trailing fee,” says Eric, “but I see gold as a pillar in most investment portfolios. Even if you’re not a professed “gold-bug,”it should, at the very least, be considered catastrophe insurance. In the same way one has car insurance or life insurance, its utility is often times overlooked or ignored until it is truly needed, at which point in time it is usually too late. There is no point in buying car insurance after the accident!”
Eric doesn’t believe the recent decline should trigger selling of investors’ gold positions. “If you are concerned about the federal debt level and inflation, you should still own gold. The yellow metal should have a place in your portfolio as a protection against the efforts of central bankers to devalue the US dollar and other currencies in order to fund massive spending plans.”
He continues: “Hectic volatility is here to stay. Don’t let the skeptics convince you that the recent pull-back is proof of the fallibility of the yellow metal.”
According to Eric, “success in this stock market, particularly in gold stocks, will require a commitment to a contrarian philosophy and a bias to only the highest quality assets. Take solace in your exposure by reviewing the original investment thesis for its continued accuracy and know when to stay the trade.”
As Thoughts from the Frontline Editor John Mauldin has put it, you want to “own stuff that they can’t print,” which is to say hard assets instead of fiat currency.Courtesy: Sprottgroup