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  Dan Dorfman: If Only Goldfinger Had Just Waited
Reported by Huffington Post on Friday, 13 November 2009 (on November 13, 2009)
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If only Goldfinger had just waited
One of Edgar Allen Poe\'s most famous stories was The Gold-Bug. Written in 1843, it dealt with a man, William Legrand, who was deemed to be mentally ill because he was obsessed with finding gold after being bitten by the gold bug. He was likened to somebody who was bitten by a tarantula spider and driven into delirium.
Nowadays, Legrande would be viewed as anything but delirious, but rather hailed as a financial whiz, what with the price of the precious metal in recent days--thanks to a rapidly expanding army of gold bugs-- climbing above $1,100 an ounce, a new all-time high.
That\'s about a three-fold increase from gold\'s opening price of $281 on January 1, 2001, more than a 100% gain from its 2005 close of $517, and a 25% rise from last year\'s close of $880.80.
What seems clear is that the earlier contingency of gold bugs--those who for many decades, and then some, used to periodically predict the metal would hit $1,000, $3,000 or $5,000 an ounce--can no longer be viewed as absolute candidates for a hospital\'s psycho ward. Or, as one gold trader put it, \"the lunatic fringe now has credibility.\"
Apparently India agrees, having recently shelled out $6.7 billion to buy 200 metric tons of gold from the International Monetary Fund for. That\'s more than 7,054 million ounces of gold. So far, India is the wiser of the two, with those ounces of gold now worth more than $7.37 billion.
The key question, of course, is whether gold can continue to glitter after its big run in recent years. One dogged tracker of precious metals, who has made excellent calls on gold\'s price moves, responds with a resounding yes.
That\'s Larry Edelson, who tracks precious metals for Weiss Research of Jupiter, Fla., and is currently in the far East. He issued his first major buy signal on gold in early 2000 when it was trading at about $260 an ounce. He then urged clients to fatten their gold holdings on October 2004 when the metal rose above $400 and made the same recommendation again in September 2005, when gold topped $450. So clearly, his gold thoughts merit a respectful hearing.
Edelson figures gold\'s hot streak is nowhere close to ending, but he does hoist some cautionary flags. In brief, he thinks we could see a temporary pullback to the $900 level, which he views as nothing more than normal profit taking and one of those periodic corrections in an ongoing gold bull market. A pullback would scare a lot of weak buyers out of the market, but then, he says, \"I think you\'ll see a rebound to the $1,500 level.\" What\'s more, he feels any meaningful selloff in gold should be looked upon as a buying opportunity.
Describing gold as a \"must own investment,\"--which, he says, should represent a minimum 10% of an investor\'s portfolio-- Edelson expects gold within two years to climb to $2,300, which would reflect its inflation-adjusted 1980 high of $875 an ounce.
Gold, highly volatile and definitely taboo for widows and orphans, is basically a currency-related play and negative events related to the U.S. dollar are essentially why Edelson is such an ongoing gold bull. Not only is the dollar on the decline, but it\'s on the verge, he says, of losing its reserve status, a happening that\'s already in the process, and which he sees occurring in 2012.
You can\'t be the world\'s largest debtor nation and maintain the reserve status, he observes; the creditors are now in control, and such creditor nations as China, Russia, Japan and India all want to replace the greenback as the reserve status, as does the IMF and the United Nations. China, incidentally, is urging all of its citizens to buy gold.
Pointing to gold as the purest investment, Edelson notes that while paper money can be printed or devalued at will, as is happening now ad infinitum, the same cannot be said for gold. It behooves everyone to realize that the dollar is in serious trouble, he says, and that if you keep your money in cash, the value of that cash will erode.
The way he figures it, a severe lack of confidence in the dollar, plunging gold production (down more than 50% in South Africa over the past 10 years) and rising demand for the metal clearly point to higher gold prices.
What about the Wall Street Journal\'s recent declaration that gold is a lousy investment? \"That\'s got to be one of the dumbest comments I\'ve ever heard,\" Edelson says.
His No. 1 gold play is Newmont Mining, the bluest of the blue chip gold miners. He also favors actual bullion purchases from leading bullion dealers, SPDR Gold Trust (GLD), an exchange-traded fund whose shares each represent one tenth of an ounce of pure gold. (Two bullion dealers mentioned to me in the past as worth looking at for actual purchases of the metal itself are Monex and Blanchard)
Edelson also is gung-ho on a trio of gold mutual funds, each of which he thinks could double, triple or maybe even quadruple over the next couple of years. They are the Tocqueville Gold Fund (TGLDX), U.S. Global Investors Gold and Precious Metals Fund (USERX) and U.S. Global Investors World Precious Minerals Fund (UNWPX).
My thought: Poor Goldfinger. He must be turning over in his grave. If he only he had waited instead of trying to make all the gold in Fort Knox radioactive.
Write to Dan Dorfman at Dandordan@aol.com
Links: Full news story
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