Remember Weimar. Think of Zimbabwe. Do you trust your own monetary authorities...?
THE PRICE OF BOTH gold and silver are on a tear, writes Byron King for Whiskey & Gunpowder.
The Gold Price topped $1,000 per ounce a few days ago. Silver is nibbling around $14.50 per ounce. The world's currency markets and investors do not trust the politicians not to screw up the value of money.
Remember Weimar. Think of Zimbabwe. Could it ever get that bad in the United States or Canada or the rest of the developed world? We sure hope not, but as Ronald Reagan used to say, "Trust, but verify."
So watch the Federal Reserve. And Buy Gold and silver. That's my advice to subscribers of Outstanding Investments, even as the Gold Price stands near all-time highs. Next month we will include a new recommendation for a great South African Gold Mining company, too – a firm which operates on three other continents as well as Africa.
So yes, I'm bullish on gold. Really bullish. Actually, I think that the price of gold could go to $3,000 per ounce in the next 30 months.
Why? The broader stock markets are vicious, now lower than during the meltdown in October. But I think, in contrast, that the precious metals environment is healthy, and many quality miners, including Goldcorp and Kinross Gold Corp., should benefit from rising gold and silver prices.
If precious metals prices stay up for a while, these firms will be spinning cash by selling increasing output into a rising price environment. And the tradition in the mining business is that cash-rich firms pay dividends. I expect to see some great dividend increases in the next couple of years.
As for oil, on the other hand, the price popped up by about 14% lately, to nearly $40 per barrel. It seems that the US inventories were lower than expected, by a mere 3.1 million barrels (just kidding: 3.1 million is a lot of oil). And tanker landings are getting fewer.
This means that the OPEC output cuts of December and January are finally kicking in. That is, all those tankers that did not load 45 days ago are now not docking.
Meanwhile, US driving and fuel usage are up, despite the recession. So Economics 101 works. With lower fuel prices, people drive more. Imagine that. Thus, gasoline supplies are tightening, pricing is firming up and prices at the pump are rising a bit.
Is this the beginning of a turnaround for the oil firms and oil service companies? Well, seeing just one swallow does not mean that it's spring.
Still, our "oil in the $30s" weeks may be coming to a close. Sure, we'll still see volatility up and down. But as we close out the winter months, we may now be in for some "oil in the $40s" weeks, and – by midspring – we believe we could be seeing oil in the $50s.
This should offer a small boost to the beaten-down service companies like Halliburton and Baker Hughes. But I don't think that it's time just yet to back up the truck and buy shares. Nibble, perhaps, at these fine companies. The world will need them over the long term. But don't spend all your war chest of cash right now on oils or oil services.
The bottom line is, the little bit of good news out there comes from the mining camps of the world. In particular, the gold and silver miners. After all, there's no fever like gold fever. And right now, I believe, we are on the cusp of a great run-up in gold. The gold miners have room to grow. They should benefit from rising Gold Prices.
Is there a need for caution? Always. Could Gold Prices tumble? Well, yes – absolutely. But for the Gold Price to tumble would take a lot of investor dishoarding. That is, people would have to hit the "sell" button all together, en masse. And that would require some tectonic shifts in worldwide tax, fiscal and monetary policies by a host of socialist-leaning governments.
For the moment, I think Gold Investment looks safe from any counter-revolutionary antics like that. For as Charles de Gaulle once noted, "People get the history that they deserve."