Up $43.00 in One Day; Did You Own Any?

The stock market rebounded Friday from severely oversold conditions, and my favorite investment was up $43.00 in a single day.

And what is that favorite investment?

Gold, of course. Gold bullion ran up $43.10 an ounce Friday to close at $791.80. Most importantly, the gold stocks jumped, as the Dow Jones U.S. Gold Mining Index was up 20% in a single day (yes, that’s 20%). And my favorite gold stocks, including Goldcorp, Newmont, Barrick and Agnico Eagle, were all up about $6.00 each.

Here’s what I said way back on December 13, 2002, in PROFIT CONFIDENTIAL: “I’ve been pushing gold bullion and gold shares for over a year now. Bank in January 2002, I personally started buying gold shares.” Back then, gold bullion was trading at about $300.00 an ounce. Today, it’s at about $800.00. Since then, I’ve been urging whoever will listen to seek refuge (and sanity) in gold- elated investments.

Now, here’s what I said back on September 21, 2005: “Despite all my ‘yelling’ and ‘screaming’ about gold, I believe only a few of my readers and a small fraction of the general public have taken a position in gold. Why? Because gold’s not trendy…buying condominiums for investment is! If you are an investor, you need to seriously look at investing in gold stocks because gold bullion prices will likely continue to rise.” (I guess I was right: We all know what happened to the idea of buying condominiums for investment purposes.)

Today, the majority of investors (the “herd” as I like to call them) flocks to the U.S. dollar each time the stock market moves a further leg down or each time another financial institution reports turmoil. One day, and it could be soon, investors will no longer flock to the security of U.S. T-bills.

As I have written extensively, at some certain point ahead, the herd will question the viability of the U.S. dollar. While, I’d hate to see what the balance sheet of the Federal Reserve looks like these days, the fact remains that the U.S. government continues to churn out debt.

I’m not saying government debt is a bad thing. In fact, if we learned one thing from the Great Depression it is that the government needs to spend its way out of this economic mess. But, at a certain point, spending like drunkards will play havoc with our currency…a currency that with each passing day becomes more encumbered by debt.

I continue to argue that eventually investors will move away from the American dollar and into gold bullion and quality gold stocks.Some old timers like me are expecting the price of gold bullion and

the Dow Jones Industrial Average to cross at some point; be it at 5,000, 4,000 or 3,000. That’s a very frightening thought. But, as we have seen lately, anything is possible. As aggressive as this sounds, investors not exposed to gold-related investments might be doing themselves long-term harm.