The World’s Greatest Investor is Dead Wrong

He’s known as the Oracle of Omaha.

His investing acumen made him one of the wealthiest people on the planet.

His company’s annual meeting drew 35,000 attendees this year.

He counsels presidents.

And he’s dead wrong about the fate of one vital commodity…

For years I’ve been saying that those who view gold as “just another commodity” absent any intrinsic value – and I lump Warren Buffett into that group – simply have no understanding of the role gold plays in modern America.

In an age of dollar debasement, gold has re-emerged as a currency. And it will continue in that role as long as America’s finances are in shambles.

Contrary to the wisdom spouted by people like Mr. Buffet, gold’s movements are not about the economy. They’re not about geopolitical tensions. They’re not about inflation (and they’ve never been about inflation— a fact that four decades of correlation statistics handily prove). They’re not about what central banks are or are not buying.

They are, instead, entirely about the direction of the U.S. dollar as a reflection of the U.S. fiscal situation. And as the last four decades have proven, the dollar will go down as America’s finances worsen …

And that makes gold a buy.

Gold is the Anti-Dollar Investment

Take a look at the chart below. It reflects the price of gold since 2000, overlaid atop the ever-climbing government debt.

See larger image

As the U.S. debt load has moved higher through the years, gold has stair-stepped its way higher, too, almost in perfect synchronicity. The metal races ahead of itself on occasion, and then either slips a bit to realign with the debt-ceiling, or it bounces around a narrow range while the debt ceiling catches up.

Right now, however, the fall in the price of gold in recent months has upset the historical trend dramatically. Based on the historical overlay, right now gold should trade between about $1,550 and $1,700 an ounce. And based on where the U.S. debt load is headed under a current political leadership that couldn’t effectively manage a weekly allowance, gold will easily crack $2,500. And if, as expected, the debt ceiling pushes up toward $22 trillion by 2016, gold could push toward $3,500. To me, that’s a huge buying opportunity for investors with a longer-term view and a fundamental belief that gold is the anti-dollar.

As I write this, gold is trading at about $1,380. We could still see gold drop down to about $1,200 or so. Or maybe, it’s as low as it gets now.

Either way, it’s irrelevant. So long as America’s finances are horrid, gold is the asset to own … and now is a good time to use price weakness as a reason to buy.

It is exactly why I am using this time to recommend that my readers grab gold bullion from EverBank, rare gold coins from Van Simmons at David Hall Rare Coins and shares of Goldcorp, Inc. (NYSE: GG) up to $40.

Sorry, Warren. You’re a fine investor. But your naïve take on gold as an investment with no utility is wrong.

Until next time, stay Sovereign …

Jeff D. Opdyke