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What a 47-Year Pro Says About Gold Now

Tuesday, January 14, 2014 6:02

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If you’ve owned gold since 2011, you’ve been crushed…

Gold is down from a peak of around $1,800 to around $1,200 today. It’s lost about a third of its value.

Gold stocks have done much worse than gold itself… For example, a basket of junior gold stocks (GDXJ) is now down about 80% since gold peaked.

Ouch!

So… What should you do? Where to from here?

I asked those questions to precious-metals expert Michael Checkan of Asset Strategies International at lunch over the weekend…

Michael has worked in precious metals professionally longer than anyone I know… He started with the largest precious-metals firm in America back in 1967 – and he has been at it ever since.

This history is important because Michael has personally lived and worked through ALL the ups and downs of the gold market – going back to the time when the dollar went off the gold standard.

So what is he thinking today?

Michael had two main points…

First, he said, we’re near the cost of production for the major gold companies. Therefore, if gold falls below $1,100 an ounce, then gold companies will lose money by producing gold.

Michael is implying that the price of gold shouldn’t fall dramatically below the cost of production, and it shouldn’t stay there for very long. Why?

Our old friend Rick Rule (founder of Sprott Global) says it best: “The cure for low prices is low prices.” What he means is, if prices get so low that they drive everyone out of business, then soon prices will go up – because eventually you reach a point where there’s more demand than supply.

Michael Checkan’s second point is that he sees gold as “portfolio insurance.” And right now, you don’t have enough insurance.

As Michael explained it… If the value of your stock portfolio has gone up, and the value of your gold has gone down, you are likely under-invested in gold now.

How much gold should you have as a percentage of your portfolio? And how should you own gold?

Those two things are up to you, according to Michael.

In summary, the price of gold has fallen down to near the cost of production, which should provide a bit of a floor in the gold price. Also according to Michael, you should own gold as insurance with a percentage of your assets. Chances are you are underinvested in gold at the moment.

That’s the story over lunch from a man who has been in the industry for 47 years…

Good investing,

Steve

P.S. Michael’s firm Asset Strategies offers several ways to own gold, each with their own pros and cons. You can learn more about them here.

Source: http://www.stansberryresearch.com/dailywealth/2640/what-a-47-year-pro-says-about-gold-now

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