Central banks and corporations are buying gold. What do they know?
While the yellow metal’s price has been trending down this year, major corporations and countries such as India and China are stockpiling gold, and many experts are warning of another market crash. Is now the right time to buy gold? Listen to our latest edition of the Market Report will Gold Specialists Will Hart and Jake Kennedy to learn more:
Mark Alyn: This is the Market Report from Birch Gold Group. Hi everyone, I’m Mark Alyn. Joining us from the Birch Gold Group, Will Hart and Jake Kennedy. Gentlemen, welcome back to the Market Report.
Will Hart: Thanks Mark, thanks for having us.
Jake Kennedy: Thanks Mark.
Mark Alyn: I wanna ask you about something that’s going on right now, and that is that the price of gold is actually going down. So, there is a number of things I wanna discuss, but first: Why is gold going down? Why is the price of gold heading down?
Will Hart: Well, again, strengthening dollar means when the dollar goes up, gold goes down. And what’s driving the dollar up right now is Europe. They are, of course, talking about printing and making Quantitative Easing, making more euros, and it’s a giant teeter-totter with everything.
Jake Kennedy: So, as the euro gets weaker, people will see as major currency the dollar – as it always has been, in many ways – a safe haven of asset. So people are lapping up dollars, dollar securities, bonds, treasuries, and that is just in the short term why right now the dollar is strengthening.
Mark Alyn: And at the same time, major corporations and countries such as India and China are still stockpiling gold?
Will Hart: Absolutely, Russia is at the forefront; they are buying it by the tons. It looks like these countries, and of course also beside countries, billionaires, they are getting gold faster than it can come out of the ground. So, I think they are taking advantage of this reduced price in gold, which why wouldn’t you buy it cheaper – you get more gold for your dollar.
Mark Alyn: We’ve talked about why people should invest in gold. And maybe that’s not the right word “invest,” but “buy” gold to protect their assets.
Jake Kennedy: Ron Paul has recently said that you buy gold as an insurance policy. And right now he said it would be the best time to be buying because gold is down, and you are buying it to either convert out of risky assets into a hard asset or tangible asset, and take advantage again of the low prices. But you buy it as an insurance policy, as a hedge against all the crazy things that we are reading that could ultimately happen with our economy.
Will Hart: And to go even further as Jake you were mentioning, it’s not just Ron Paul, but you got billionaires like Warren Buffet flat out saying: hard assets. I believe in a previous episode Jake mentioned about him buying rail roads, but gold is right there, again a hard asset, something that is not gonna take a giant tumble that the experts are predicting is coming any day now.
Mark Alyn: But at this point the market is robust. It’s strong, is it not? Or it appears to be?
Will Hart: It appears to be.
Jake Kennedy: Yes, and you can look at the underlying factors that are driving the market and you look at companies that are shedding staff but their profits are going up and so their share prices are going up. And if you look at how all this Quantitative Easing money, ultimately where it goes, it goes into banking systems, dollar-backed securities and through the financial systems and into the pockets of the banks. And what they are doing? They are buying back their own stocks. They’re finding places that actually are creating revenue for their companies right now selling not in cash, selling not in bonds. So, where do they put it? Back into the market. It’s a kind of interesting cycle that is driving the market forward. David Tice was on CNBC last week, a big mutual fund owner, thinks that we are at the top of the market and that stocks are overvalued, and they can take 30 to 60 percent tumble any time soon.
Mark Alyn: That would be worse than 2008-2009.
Jake Kennedy: Well, many people are saying that the next crash will be worse than 2008-2009. We’ve got Peter Schiff saying: It’s not just the markets – it’s gonna be the dollar; it’s gonna be again the housing market, the bond market – they are all bubbles now that are ready to burst.
A lot of people are on both sides of the fence, but the realities are: The markets are high; gold is low; great time to be selling overvalued assets; great time to be buying undervalued assets.
Will Hart: Yeah Mark, here’s the reality: When you have all these experts saying the same rhetoric and that is – that the market is poised, that the dollar is losing value, gold is being possibly manipulated and [its] value held down – why would you take a risk, why would you say, “Nah, all these experts, all these billionaires, and all these countries – what do they know? I’m gonna go ahead and stick with what with my financial advisor or so and so says.” I think diversification, I don’t think you should take every penny you have and buy gold, but I think you should diversify.
Jake Kennedy: And it’s a very different time right now to when we were in 2007 and in 2008. It was kind of euphoria, everyone was blinded by this euphoria and blindsided by the fall that came. A few smart people saw it coming [and] they are the same smart people that are seeing it coming again but where we are today is in a very different position. We know what happened in 2008 and it’s kind of happening again. The markets are up and all these different areas are up, and we can see the economy imploding on itself underneath the surface. All the retail outlets collapsing, unemployment worsening, more people on food stamps, so we are supporting the underlying infrastructure so that it doesn’t just implode. But people see that this cannot be sustained, and it’s the smart money that are seeing this right now because it’s literally right in front of us. Most people aren’t choosing to see it, they are not wanting to believe it and they are doing exactly the same thing they did with their portfolios in 2007 and in 2008 as they were back then. The smart people are saying, “Well, I see the writing on the wall, maybe it is time to do something and diversify.”
Mark Alyn: And to diversify into hard assets such as gold, silver…
Jake Kennedy: Absolutely.
Will Hart: Again, it’s like they say, “Fool me once, shame on you; fool me twice, shame on me.” People have already seen what happened in 2008; they saw it happen and they were caught unexpectedly and now it’s happening again. And if these people aren’t gonna take another path, well it’s their own fault this time.
Jake Kennedy: Most people we have coming to us today are the same people. They say, “You know what, I don’t see this ending well. I don’t know if it’s in a month, three months, or six months or even a year, but I can’t live like this. I’ve got to do something, and I gotta get out of my stocks and my bonds because this isn’t gonna end pretty.” They are the people who are buying gold right now.
Will Hart: If you live on the beach and you were notified by the news station that there’s a tsunami on the way, you don’t just sit there and put your feet up on the sofa and watch TV; you jump in your car and you head to higher ground. When there’s all these warning signs that are coming, the people that are sitting there thinking, “Ah, I’m okay in paper; I’ll cross my fingers and hope Obama does a good job and everything else is just gonna turn out dandy.” They’ve only got one person to blame if this all happens and if the experts are right…
Mark Alyn: And that’s themselves.
Will Hart: And that’s exactly right.
Mark Alyn: Would you say that this devaluation of gold is a manipulation by world governments? Is that what’s happening?
Jake Kennedy: There is evidence and hearsay and speculation and conspiracies – I’ll lay out some of the broader kind of sentiments from that side. It’s questionable, some people would say you’re crazy, but there is a belief out there and there are some facts to back this up, particularly after the drop of gold in May last year by 30 percent, that it is a big takedown of gold. This is what people like Paul Craig Roberts who was the former treasury secretary under Reagan. He came out and said it. He said: It is in the government’s and the Federal Reserve’s best interest of these institutions and the global banking system to bring the price of gold down. Because if the price of gold goes up, as it should be, because of all the debt we are creating and we are creating more of it than we ever had before, gold should be breaking records over $2,000 an ounce. But it’s not. It’s whatever it is today.
Mark Alyn: It’s been hovering around $1,300.
Jake Kennedy: It’s way down from where it was at record peak levels. Why is that so? He said this about a year ago: It’s in the government’s best interest because if gold prices are super high, then that means that dollar is in trouble. It means that people have no faith in the dollar, and they have faith in gold. Then people will lose faith in this fiat currency, lose confidence in it, and boom, the dollar implodes and we all gonna have an empty basket.
Mark Alyn: And at the same time if gold goes down, the theory is that the dollar has more value, am I correct?
Will Hart: Correct, when gold goes down it gives the appearance that the dollar is stronger. But, Mark, we’re sitting on an $18 trillion debt. I think a lot of people have seen past the Wizard of Oz, so to say, past the smoke and mirrors, and see that our economy, unemployment, we’re in shambles, and right now literally we are hanging on by strings. Experts are talking about us losing the world reserve currency. If that happens people are gonna forget about this potential market correction. You are gonna lose a large percentage of the value of your portfolio as it is. And I mentioned previously about what happened in Germany – how they lost the value of their currency after the end of World War II. So there’s no telling where all this is gonna lead. Again, hard assets, gold, silver, that sort of thing, is outside of that realm.
Mark Alyn: Because it’s a hard asset.
Will Hart: Correct.
Mark Alyn: It’s backed by itself.
Will Hart: Nobody’s printing gold.
Mark Alyn: Right, alchemist tried, but they never made it. Are there benefits of gold going down?
Will Hart: The only benefit is obviously buying it. You are buying it at a better price. With the attitude that it’s gonna go in a different direction based upon what all the experts are saying.
Mark Alyn: Now, we’ve asked this question before and it’s pretty simple: If you have a portfolio and whatever its value is, are you saying move part of that into gold? All of it? Or is it up to the individual?
Will Hart: It’s up to each person. They choose what they feel is best for them. Again, we don’t give any recommendations as far as percentages. If the person wants to put 5% or 100%, it’s up to them. But whatever they are looking for when it comes to gold and silver, platinum, palladium, we have it.
Jake Kennedy: Some of my clients say, “Look, this is falling off a cliff. I gotta take all my money, I see exactly where we are going, and I’m gonna convert everything into metals for the next few years, right out of the crisis, and convert them back to whatever is hot at the time: stocks, paper, whatever it is.” I got a lot of people say, “I’m just gonna take 5 percent.” A great hedging strategy is 20-30 percent as we talked about before. It’s the figure that we’ve worked out that protects the portfolio’s value if the market drops 50 percent or if the dollar loses 30 percent. That’s gonna balance out the overall value of the portfolio.
Will Hart: Yes, it will cover the losses. But again I have a lot of clients who would do the other side and say, “I don’t wanna break even, if this is gonna happen…”
Mark Alyn: I wanna make money…
Will Hart: I wanna make money, sure. So again, everybody has a different mindset and we’re here to help them anyway we can.
Mark Alyn: If you are have questions for the people at Birch Gold, you can e-mail us at [email protected] The information found at www.birchgold.com, the website is amazing. There is interviews with Steve Forbes and others, some exclusive interviews, lots of original content, lots of information on buying precious metals and I encourage you to visit www.birchgold.com. And of course if you’d like to speak one on one with a Gold Specialist, you can call us at (800) 355-2116. We have been joined by Will Hart and Jake Kennedy of Birch Gold Group. Gentlemen, thanks for joining us again.
Jake Kennedy: Thanks Mark.
Mark Alyn: For the Market Report from Birch Gold Group, I’m Mark Alyn. We’ll see you next time.