It’s Not Too Late to Buy Gold — Or for Uncle Sam to Tax It!

• Another gold record… Chris Mayer explains why it’s not too late to buy

• Today’s juicy rumor: A tax on gold profits

• Global recovery killer: After pricing method change, iron ore prices quietly rise 147%

• Will the stock correction turn into new bear market? One historic indicator worth watching

• Plus, inbox rage: The 5 labeled both un-American and an enemy of Canada

  Another day, another all-time high:

Chalk up yet another record for gold today, having just eked by its previous record of $1,249 an ounce. You know the story by now: The EU debt crisis of today, the U.S. debt crisis of tomorrow and an uncertain stock market… all good for good old gold.

But is it too late to buy some more?

“My short answer is no,” writes Chris Mayer.

“Gold isn’t is always a good investment… If you bought gold in the 1980s and 1990s, your return was abysmal. So as with all assets, there are times when gold is a really good buy and there are times when it is not. Sounds obvious, but many people seem to want to think that gold is an exception to the order of things. It isn’t…

“But frankly, the gold market is set up perfectly these days. You couldn’t design it better. Bad stuff is happening — see the crisis in Europe. And you can surely bet more bad stuff will happen, given all the debt and leverage that still remains in the system. Even if you don’t know exactly what will happen or when it will happen, you know a monetary crisis is good for gold.

“As an added bonus, gold has a track record, which will attract fans soon enough. And when it does, it can’t really accommodate many buyers, because the market is small. This means the chances of the gold price spiking upward are pretty good. It’s like being in the lifeboat business on the Titanic. No price will seem too high!”

  Right on cue — as the value of gold shines under the spotlight — rumors abound that global governments are mulling some sort of tax on gold profits.

“A special tax on private gold owners’ gains may soon appeal pretty much everywhere,” friend of Agora Adrian Ash wrote recently. “Longtime holders were early and right in spotting the financial crisis ahead — and nobody likes a smart arse, remember. Even more recent buyers are also showing notable gains, and most notably against the fast-sickening euro, too… German and Greek politicians must now be wondering why Europe’s central bank gold sales ended without having a gold tax ready and waiting to keep milking the metal.”

And this, from Alen Mattich of The Wall Street Journal:

“Any assets that can be valued relatively easily and any income flows, whatever their source, that governments can get their hands on will be a temptation for the taxman. Is, say, a levy on gold — everybody’s favorite safe haven — impossible?”

Nope.

No official word on all this yet, and of course, this won’t happen without a big fight. But our government has done worse to gold owners before…

  Another precious resource on the rise: iron ore. Mining monoliths BHP Billiton and Rio Tinto announced this morning they will raise iron ore prices by up to 23% in the third quarter. That’s the second big hike already this year. You might remember, back in April, the major mining companies agreed to change the way iron ore is priced, from annual to quarterly contracts.

This change, coupled with the global “recovery,” has pumped up iron ore prices to about $150 a ton — 147% higher than the average price in the fiscal 2009.

Considering China’s desperate need for steel — both for themselves and for all our consumables — this is a trend worth watching.

  Et voila: Chinese demand for cars and trucks fell to a 14-month low in May, the China Association of Auto Manufacturers says today. Sales there increased “just” 26% year over year, the slowest pace since the dark days of March 2009.

  Could China be the straw that finally breaks the back of Goldman Sachs? Check out this bit from the state-owned China Youth Daily this week, channeling Matt Taibbi:

“Many people believe Goldman Sachs, which goes around the Chinese market slurping gold and sucking silver, may have, using all kinds of deals, created even bigger losses for Chinese companies and investors than it did with its fraudulent actions in the U.S.”

Similar Chinese state papers have called the firm a “black hand,” one that “played little tricks carefully designed to gamble with Chinese enterprises.” Heh, is that not the exact definition of foreign investment banking?

Again… another trend in China worth watching. We’re seeing so many, in fact, we’ve decided to hold a special conference call on the China boom/bust debate. We’ll be on the line, along with Chris Mayer and some of our favorite China contacts: One’s a veteran journalist, who’s been covering Chinese economics for decades. The other, a finance executive who’s helped list Chinese companies in America and directed financial affairs for all sorts of major Chinese businesses.

In short, we’re doing our best to get a frontline, spin-free report on the investment situation in China… and for the first time, you can listen in. Details here.

  American banks have had a rough week in general. Goldman also got slapped with a Federal Crisis Inquiry Commission subpoena this week, demanding the company’s bigwigs come back to Washington and articulate their role in the credit crisis.

  Across the Atlantic, JP Morgan is about to pay the biggest fine in the history of the U.K. Financial Services Authority. The Brits found the bank guilty last week of not separating client money with its own risk capital… one of those fundamental, slap-your forehead no-nos of money management.

The cost of this remarkable breach of ethics: $49 million, a little over 1% of JPM’s net income in the first quarter of this year. Yawn… that’ll teach ’em.

This “Wall Street Fandango” is both a chapter in Empire of Debt as well as the theme of the next issue of Apogee Advisory, which is due out any day now. We challenge the popular notion that all an investor must do is hand his money over to Wall Street and poof! — by some magic never fully described, it comes back to him tenfold. In reality, most of his money ends up in the pockets of his bankers.

We dig a whole lot deeper into that idea in this issue, while offering some ways to avoid the mess. Learn how you can be among the first to read it, right here.

  Stocks continue to fall this week. The Dow and S&P fell over 1% again yesterday, continuing Friday’s big sell-off. Just as we hinted above regarding gold… there’s no “new news,” just continued debt and leverage crises around the world. The S&P opened down this morning about 0.2%

Thus, the S&P is now over 13% off its April highs — well into correction territory and marching toward another bear market.

We’ll be watching the S&P extra close around 1,035 (it’s at 1,050 now). That level would mark a 15% fall from its highs. Recent S&P research declared that since 1946, 80% of the time the index has fallen 15%, its gone on to a technical bear market — a drop of 20% or more.

In short, if the S&P falls over 15%, there’s a high probability it will fall much further.

  A persistently stronger dollar isn’t helping stocks, either. The dollar index has risen five full points over the last 30 days, to 88.3 as we write.

The euro is still the whipping boy of the global debt crisis. It’s down to a new four-year low of $1.19 this morning — even after the EU announced a wave of new austerity measures this week. Practically every euro-zone country is cutting back… but traders don’t seem to care.

“When you raise taxes, you suck cash flow out of the private sector,” Rob Parenteau explains the euro fall — as he has forecast so accurately since late last year. “Ditto when you cut government expenditures. Unless, under special circumstances we describe for you in more detail in the upcoming monthly letter, something prevents the private sector from pulling back its own expenditures as its cash inflows are reduced, rapid fiscal retrenchment will be thwarted by deeper revenue declines as private spending retracts on weaker private cash inflows.

“Attempts to use rapid and large fiscal retrenchment to avoid public debt defaults virtually assure an escalation in private debt defaults. This follows from nothing more complicated than double-entry bookkeeping.”

Rob continues to hold his call for dollar/euro parity in 2010. Thus, there’s still room in this short euro trade. Find out his favorite ways to play it by joining the Richebacher Society.

  “The fact that Canada is beautiful,” an upset reader writes, “has no bearing on the fact that you do not hold your conferences in the U.S. Nor does the fact that you have some percentage of Canadian subscribers. WE are of Canadian descent, so what? Yours is an AMERICAN company with a majority of AMERICAN subscribers. Don’t tell us that America doesn’t have places to hold your events as beautiful as Canada…”

The 5: Uncle Sam gets his cut 365 days a year, no matter where Agora Financial does business. Sure, there are loads of great conference locations in I.O.U.S.A. But in each one, the SEC and other regulators make hosting an investment conference so cumbersomely bureaucratic that it’s barely worth the trouble — even an event as perfectly legitimate and legal as ours.

Besides, we don’t feel the need to apologize for “spreading the wealth” a little. That’s the big theme these days, right?

We like having our Investment Symposium in Vancouver. We’re not changing. Please learn to live with it. Better yet, join us.

And hopefully after you read today’s P.S., you’ll cut us a little slack regarding our civic duties.

  “THE INDIVIDUALS ‘Addison Wiggin’ AND ‘Ian Mathias’ HAVE NOW BEEN IDENTIFIED POSTING FRAUDULENT INFORMATION AGAINST CANADA,” a reader wrote on our blog yesterday. Evidently, we published, “FALSIFIED INFORMATION FOUND TO BE IN CONTRAVENTION TO THE CANADIAN GOVERNMENT, AND DEPARTMENT OF FISHERIES, OPERATOR OF THE SEAL HUNT.”

The 5: We have to stop this reader mail here. Its 1,267 words is easily the longest post we’ve ever had on the blog. So many capital letters, too… we just can’t take all that shouting.

Still, read it all here. It is truly hilarious. We’re accused of “attacking the nation of Canada” and calling “Canadian citizens and Canadian scientists liars,” among other things.

Alas, we thought our evil scheme had finally come to fruition. We’ve spent three long years writing The 5, twisting our greasy mustaches, waiting for the right moment to publish an unsolicited reader mail supporting the Canadian seal hunt. Hopefully, it would push seals into extinction and ignite a fire that would burn Canada to ruins. But no… busted.

Heh, you can continue the “debate” on the pros and cons of clubbing seals there on the blog. It’s one we never intended to start, and certainly don’t care to finish.

Now that we have seemed to cause great offense to both Canadians and fellow Americans, we’ll call it a day.

Your fraudulent, falsifying editors,

Addison & Ian

The 5 Min. Forecast

P.S. Lighting has struck here in Charm City. Addison and Dave Gonigam (who deftly helps us craft The 5 every day) have both been summoned for jury duty today at the city courthouse. They reported to room 240 at 8:15 this morning for likely another of Baltimore’s famous one-day trials.

“The last time,” Addison typed on his iPhone this morning, “I got selected for a murder trial, which was thrown out on the second day. The police had coerced eyewitness testimony out of a dude who was actually in prison at the time of the murder. Maybe this one will turn out to be just as entertaining.”

We’ll be sure to fill you in as to how the scales of justice rise and fall. Stay tuned. Until then, please be patient… The 5 is now quite understaffed.

P.P.S. Update: Right as we were ready to publish, we hear Addison is one of 179 jurors being herded to Judge Watts’ court across the street from the main city courthouse. Meanwhile, Dave was one of 600 jurors (!) summoned “upstairs” to various jury selections. More details tomorrow… sounds like it’s been a busy month in “Charm City.”

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