Three months ago, I wrote a PROFIT CONFIDENTIAL column entitled, “Google or One Ounce of Gold: What I’d Buy for $700.” At that time both one share of Google and one ounce of gold were trading at approximately the same price, $700.00. In my article, I wrote that if I had a choice, and had $700.00 to invest, my choice would be to buy an ounce of gold rather than a share of Google.
The world has changed quite a bit since then. The U.S. is in a recession. Microsoft is chasing Yahoo! in its attempt to stop Google’s Internet search engine dominance. Fast-forward to today and Google trades at $516.00 a share. Gold bullion is up to $922.00 per ounce. And my $700.00? It’s doing just fine.
Veteran followers of my writing are obviously aware of the bullish stance I took on gold in late 2002, early 2003. I’ve been saying buy gold since then and I’m still saying it today.
Now, if you are reading this for the first time, you might say, “Sure Michael, you recommended gold at $300.00 an ounce and it’s up 200% since then to $900.00. The easy profits are gone” To this, I say: quite the contrary. I believe the biggest profits from gold are yet to come. I said that when gold reached $500.00, I said it when gold was at $700.00 and I’m saying it again today, when gold bullion is $900.00 per ounce.
In particular, while gold bullion prices have tripled, top-quality gold producing stocks have not. It’s almost like the gold stocks don’t believe the rally in the gold bullion market!
Let me tell you a little secret as to why gold stocks still have their best gains ahead of them:
The big financial institutions and mutual funds have not bought into gold stocks yet. In fact, most are not even following the bull market in gold bullion.
As the U.S. Federal Reserve keeps interest rates low to get consumers spending out of the recession, as we continue with our huge fiscal deficit and trade deficit, the U.S. dollar will continue to fall against other world currencies. And gold bullion prices will continue to rise as the new world currency of choice.
To date, since gold has been rallying, only a few foreign central banks have caught on to the premise that they should have gold bullion as their reserve currency as opposed to U.S. dollars. As the remainder of the world catches on, gold bullion prices will rise, large financial institutions and mutual funds will get in to the act… and that’s when quality gold stocks will really take off.
I really wouldn’t be surprised to see gold bullion at $3,000 per ounce. So, that price of $900.00 an ounce of gold that we see today — I’ll just call that a bargain.