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Last week I talked with a man I know who reads our newsletter.  He bought most of his gold in the early 2000s when gold was in the $300/oz. range.  “Gold has been a terrible investment,” he said.  “Think of all the interest I could have made on the money I spent on gold.”

“Gold isn’t an investment, it’s an insurance policy,” I said, “You may need it some day.”

He replied, “I don’t need it for insurance.  I’ll never have to sell it.  I’ll leave it for my kids.”

I said, “Will you change your mind when gold is $3,000 or $5,000 an ounce?  You bought it at $300 and it’s up three to four times.  That certainly beats any interest you would have earned over the last decade.”

He owns gold but doesn’t really know why and doesn’t see its worth.  It’s just something he owns and isn’t performing and he will leave it for his kids.  I understand his view – many people share it, but he has read my newsletter for the last two years and the message we offer every day simply isn’t getting through.

Most people don’t differentiate between GLD (the ETF) and physical gold.  To most people gold is gold, in all forms and there is no reason to own physical gold when you can buy paper gold.  It’s simply not so.  This is such an important distinction that I featured Jim Sinclair’s comments in my daily.  Our hope is that you take him seriously; especially his GOTS (Get Out of the System).  No one works harder to open your eyes that keeping your portfolio in dollars is a disaster in the making (see his comments in the Featured Articles section below today).

Back to my conversation…I asked him if he read Greg Hunter’s interview with Jim Sinclair and he replied he must have missed it.  I re-sent it to him.  After listening to it he said “Gold will never reach $50,000 in our lifetime.”  That’s not the point.  The interview was all about the unavoidable collapse of the dollar and the danger in keeping your money in banks, stocks and bonds.  (See Featured Articles section today).  If the only thing you take away from the Sinclair interview is his prediction that gold will reach at least $3,200 by 2016 and could hit $50,000 by 2020 then you either weren’t paying attention or you refuse to give Sinclair much credibility.  Both would be a mistake.

Most of the people I talked to about the interview focused on the PRICE and seemed to skim over WHY we are headed toward higher prices.  To me, it’s all about the WHY.  You see, the whole argument is that the dollar is about to implode and it will take destroying your wealth in the process.  It will lead to bail-ins and wealth taxes and pension plan and retirement plan confiscations.  (See Featured Articles section).  The ultimate price or even the exact timing is guesswork, at best.  Suffice it to say the dollar will fall and gold will rise and we are getting closer and closer to the inflection point with every passing day.

I get it that that most people still don’t understand gold’s role in a portfolio, even many people who own it.  But I don’t understand why, since Andy, Bill and I discuss it every day.  What is so hard to understand here?  Why should any of our readers get upset if gold (and silver) falls?  Why be in such a big hurry to see the price rise?  Gold doesn’t rise in a vacuum.  Unfortunately things have to fall apart for gold to reach the numbers Sinclair is predicting.  Hyperinflation and civil unrest will accompany the high price gold!

By the time most people figure out that gold is a necessary part of any portfolio, it will cost a great deal more to acquire – and the longer they wait, the greater the possibility that no one will sell it to them.

When the dollar starts to fall, and that day is coming, most people still won’t realize that their dollar-based assets are melting away.  Most people will buy gold because the price is going up and they will buy it as an investment.  The reality is all dollar-denominated assets – in cash, bank deposits, common stocks and bonds – are LOSING value because they are denominated in dollars, which are losing value).

I wish it weren’t so, but we are mostly preaching to the choir and it is a small choir at that.  Our audience was small to begin with and a lot of fringe-buyers have lost interest and sold out.  That’s because they never understood why it was necessary in the first place and bailed when it started to pull back.

We are still in the early stages of the decade-long gold bull market.  The reason I say that is because most people are still motivated by greed, not by fear.  When buyers are motivated by fear instead of greed, the bull market will be back in full force.  Give it a year or two and that’s exactly what will happen.  But by then, it will be over $2,000 and moving toward $3,000.  The dollar will be approaching 70 on the USDX and if it doesn’t hold that level, then we will be facing hyperinflation and you can pick your price – $10,000 or even $50,000 but in hyperinflation it won’t buy much.  Think of the alternative?  What will your dollars buy!

The following two charts suggest that gold is about to start moving up. Production is falling and physical demand is rising.  The combination of these two trends has to lead to higher prices!

Physical Gold delivered

Here is another chart that goes well with the first chart…

Steady Accumulation

China imported 116.3 metric tons in September. It’s down from August, but the year-over-year increase is 67%.