Just how valuable are America’s gold reserves? Some believe that there is not any gold in Ft. Knox, otherwise known as the United States Bullion Depositary.
It has been forty-two years since a group of reporters were allowed into its vaults, to dispel this persistent rumor. Since then, no member of the public has been allowed in.
According to the Federal Reserve, the depositary holds 4,176 metric tons of gold, or 147 million troy ounces. At the current price of gold, this works out to about $175 billion.
The bullion deposited in the vaults is within Ft. Knox. It is protected by layers of fences, alarms, video cameras, microphones, mine fields, barbed razor wire, electric fences, heavily armed guards, and the army units based at Ft. Knox.
These army units amount to about 30,000 soldiers, along with apache helicopter gunships, tanks, armored personnel carriers, and artillery.
Good luck getting in to take a peek.
Over the last several years, I have seen my share of washed-up celebrities advising me to buy gold. I have also seen many goldbugs and perma-bears telling me to avoid stocks and buy precious metals instead.
They kept telling me that the stock market, along with the U.S. dollar was going to crash. They also were telling me that both inflation and gold prices would soar!
They have been wrong.
Gold peaked in the fall of 2011 at about $1,800 per ounce and it then fell for the next four years. It has been in a bear market.
In addition to this, the stock market has now been going up for over seven years. It is the third longest bull market in history.
The dollar did not crumble, it strengthened instead. Inflation did not soar, instead it has been almost immeasurable.
We are now finally starting to see a meaningful move in gold however, and the inflation Geiger counter is starting to tick, tick, tick…
Is it a case of a broken clock is right two times per day, or were the goldbugs and perma-bears just five years early with their doomsday predictions?
I would say that it is a little bit of both.
Economies, markets, and asset classes are cyclical in nature. If one waits long enough, eventually that which was at the bottom of the heap will be at the top of the heap and vice-versa.
With the stock market at the top of the heap over the last seven years, gold has definitely been at or near the bottom of the heap.
But, now after five years of bear, bullion looks like it has finally bottomed and has now reversed its course.
I have my own proprietary ranking system that measures long-term performance, short-term performance, valuation, safety, and technical patterns. Look at where Agnico Eagle (AEM) was ranked one year ago vs. today.
Agnico-Eagle is one of the precious metals stocks that I currently own.
I have been a bear on gold for the last five years, while I have been a bull on stocks for the last seven. I am still a bull on stocks, but I am also now a gold bull. By the way, silver stocks also look good again.
I currently have a position in Pan American Silver Corp. (PAAS).
Oh, I would not go overboard with gold or silver. I currently have about a 6-7% overall position amongst the various portfolios that I manage. But I have had zero exposure for many years now to the precious metal.
Why the sudden change in my opinion?
The answer is easy.
Something unexpected happened on the way to those four expected rates that Janet Yellen was jawboning about. She did a one-eighty instead.
Her feathers changed from those of a hawk to those of dove as quickly as you can say “the worst January in the history of the stock market.”
THIS HAS CAUSED THE DOLLAR TO TUMBLE.
The greenback is now threatening to break through its support level in the $0.94 area. I thought that is was supposed to be worth a buck. Maybe we need to go back to the gold standard!
The case of the “sinking dollar” is just the opposite of what have we had over the last few years. One multi-national company after another has been whining about the negative impact that a strong dollar was having on their earnings.
Now they suddenly have the wind at their back instead of in their face.
A sinking dollar is also bullish for precious metals, oil, and other commodity related stocks. It is about time. Commodities have just gone through one of the worst bear markets in their history! Remember the commodity bubble that peaked in 2008?
Boy, did it pop!
Commodities are now giving a technical buy signal.
How long will the commodity and gold rally last?
As long as doves continue to fly out of the mouth of Fed-Chair, Yellen
I think we have clear sailing until after the November presidential election.Interestingly enough, the market was mostly down this past week, on global slowdown fears and fear of a Fed tightening soon. I don’t think so.