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-- Posted Sunday, 23 May 2010 | | Source: GoldSeek.com
As he watches the price of gold march inexorably toward $2,000 (and beyond), and keeps an eye on developments in the Western world, S&A Resource Report Editor Matt Badiali tells Gold Report readers in this exclusive interview that it's time to make space in the safe for gold. That's gold to hold, preferably to pass on to one's heirs, but if need be to pay for one's meat and potatoes. As for investments in these troubled times, he's hot about investors adding shares of the booming senior gold mining stocks to their portfolios because "we're going to see them really soar." The Gold Report: A recent issue of Stansberry Digest addressed how the European bailout will influence the U.S. dollar—or, as some would put it, the U.S. dollar implosion. How do the paper currency issues afoot in Europe set up gold for a bull run? Matt Badiali: First of all, if you think of the Fed as a company, they can print as many shares in the form of money as they want, but the underlying value of the whole company doesn't change. So that means the value of every share that they print or every dollar that they print has to get smaller to reflect its portion of the whole. At least with a share, you know that you own a piece of a company. It used to be that every dollar issued was backed up; you could take it in and you could get something—like gold or silver—for it. Paper currencies now are really IOUs that aren't backed by anything. There's really not much holding them up.
In the past when we've seen paper currencies implode, say in Argentina 10 years ago, and the typical American or Western European figured, "Oh, that will never happen to us. We're smarter than that." Now, having just watched this implosion with the European Union, they realize, "Holy smokes! This is real; this could absolutely happen to us."
The smart money is watching George Soros and John Paulson and the like—people who have been very, very smart and very, very right about their investing in the past. They're betting heavily on gold, getting in front of gold now. Beyond maybe buying a few shares of gold ETFs, not many retail investors recognize gold as money. Really, that's what gold is; gold isn't useful for much of anything else. They make some foils out of it to use on spaceships, but it's not an antimicrobial like silver; it's not a good catalyst for cracking hydrocarbons like platinum.
TGR: What about jewelry?
MB: It does make for nice jewelry, but ultimately, jewelry is a symbol of wealth. Years ago, you could break a link off a piece of jewelry to pay for something. I think this whole financial crisis in Europe is going to sink in with the U.S. consumer and also around the world. I don't mean to say the U.S. will drive the price of gold higher, but I think the Euro price collapse will hit home on a different level than ever before.
When you see Greeks rioting in the streets and you see people writing trillion dollar checks to save a currency, this is hitting home, and I think people are going now to start taking gold a lot more seriously as a store of wealth. This has been fairly abstract until now.
TGR: What do you think could take gold to $2,000?
MB: Look back just five years. The gold ETFs started life at $40 a share; they're now at $120 a share. That's more than 200% gain in just five years, driven by turmoil. The financial turmoil over the past five years has been nothing compared to what we've seen in the last 12 to 18 months, but the fallout of the economic crisis is still coming. We can expect slow insidious inflation as more and more money gets printed. Every time there's a bump in the road, governments want to print more money. Investors are going to take it far more seriously now than they have in the past, and I think that $2,000 is very, very reachable from here.
TGR: A good time to invest, then?
MB: This is not the time to be speculating in gold. I wouldn't buy a bar of gold thinking I'm going to sell it in six months. I'm going to put it away and when my children get married, that's a wedding present. My grandmother always used to tell me about penny candy at a little store by the lake where she lived. By the time I was old enough to go to that store, the penny candy cost a nickel. Now it's $1.25. That's the power of inflation, and it's going to get a lot worse over the next 10 to 20 years. That's the timeframe I would use to invest in gold. People should absolutely have some of their wealth in gold because that is going to be a very safe, long-term store of value.
TGR: As you reiterated in a piece we saw published last week, you believe in holding actual physical gold as a form of savings. But can people also take advantage of the security of gold in the marketplace?
MB: When you're talking about investments, that's a shorter timeframe now. Gold miners stocks are absolutely a tremendous way to go.
TGR: Any final thoughts for our Gold Report today, Matt?
MB: Speaking at the PDAC in Toronto, Pierre Lassonde said if big miners had a good first quarter this year, we should mortgage our houses to buy them. And they've all had stupendous quarters; their profit margins have gone way, way up.
TGR: Keeping pace with the price of the commodity for a change.
MB: It's always dogged the big miners that they haven't returned anywhere near the price of gold. They're mining gold, producing gold. When the price of oil goes up, the oil producers stocks go up in value, right? The problem was the costs kept chasing the price of gold up. As a result, the grade of their ores was falling while the costs of mining were rising, pacing the rise in gold price. That's held them down for a very long time and they've been overlooked. I think we're going to see them really soar over the next 12 to18 months, and the market's paying attention. So my final thought for the day? Buy big gold right now.
TGR: Thanks, Matt.
MB: One more thing. I don't care if you're a 90-year-old retiree or a 35-year old with lots of earning power ahead, you must have gold (the metal) and big oil in your portfolio. We are in the midst of one of the greatest resource bull markets of all time. You've got to have exposure. You absolutely must.
Matt Badiali is the editor of the S&A Resource Report, a monthly investment advisory that focuses on natural resources—from small exploration outfits, to equipment companies, to the biggest commodity companies in the world. In Matt's own words, "as a geologist, I focus on all natural resources including silver, uranium, copper, natural gas, oil, water, and gold, just to name a few." He's also a regular contributor to Growth Stock Wire, a free pre-market briefing on the day's most profitable trading opportunities. Matt has real-world experience as a hydrologist, geologist and a consultant to the oil industry and he holds a master's in geology from Florida Atlantic University.
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-- Posted Sunday, 23 May 2010 | Digg This Article | Source: GoldSeek.com
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