Best of Dennis – When It Comes To Gold…. Buy? – Sell? – Hold?

Best of Dennis…

Dennis is taking some time off as he and Jo navigate their move, but he will be back writing soon. Given the current price of gold, this article from November 7, 2024 is an interesting read! Take a look back at what Chuck Butler and Dennis discussed about buying, selling, or holding gold around this time just one year ago….

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Every Friday I update our investment accounts. I was excited; we hit a new milestone. Jo and I headed to one of our favorite restaurants, Logan’s Roadhouse. When I ordered an expensive filet, she raised her eyebrows, “That’ll cost ya!” I shared the good news, and thought we should celebrate.

She smiled, and then brought me back down to earth. She looked at the menu and remarked, “prices everywhere are going “to the moon.” She asked, “You write about inflation a lot, are we really keeping up?” Good question. I passed on ordering the expensive dessert…. I needed to do some research.

When I got home I opened the handy Inflation Calculator, using 12/31/2019 as my starting point.

The published rate of inflation shows an increase of 23.3%. That is a phony number, costs for seniors run much higher. We have to do much better or we will lose buying power to inflation.

Quicken calculated our increase over 38% for the same time frame. We invest conservatively and have around 33% of our portfolio in cash. We made it five more years without having to tap into the principle, dealt with some real health issues, and managed to buy a summer home where Jo grew up. We did OK, not getting rich but holding our own. I’ll take it! An occasional dessert is fine….

Jo pulled up a chair and I showed her the numbers, answering her dinner table question. I emphasized that our gold, and gold stocks had some double- and triple-digit gains after being almost dormant for a few years. She asked another good question, “Gold is at an all-time high, should we sell?”

When it comes to gold – Buy? Sell? Hold?

I shared my thoughts, but let’s get a second opinion from friend, and expert Chuck Butler.

DENNIS: Chuck, thanks for taking the time to educate our readers. Gold prices are regularly setting new highs. BGASC shows us:

Since 12/31/2019 gold has risen around 80%.

While conventional wisdom says there comes a time to take some profits; I have no intention of selling. How do I explain that to Jo when she has seen us taking profits on stocks when gains are much smaller than those we are sitting on?

CHUCK: Thanks as always for allowing me to opine! I’ve heard the same type of question from my wife, Kathy, and I tell her this…. Let’s hope we never “have to sell”, because we are in dire straits…. Because to me, that would be the only time I would look to sell… I would much rather put the physical Gold at the bank and let me borrow off of it… Now that’s a product that’s a long time coming, but it will arrive sooner rather than later.

Unlike other investments, we bought boatloads of gold and silver for different reasons. While I expect Silver to rise to its previous all-time high of $50, I will gladly sell my silver coins to pay for items we need, instead of my Gold…

DENNIS: CBS News asks several experts:

“Will the price of gold hit $3,000 in 2024?

Some industry experts say 2024 could see gold’s price reaching $3,000, but it’s more probable in early 2025.”

When I see stuff like this, it comes off as stock jockeys speculating on the price of gold.

There’s been a few times I’ve bought mining stocks on dips, with the intention of selling at a profit. When we were helping grandchildren’s college funds, we used some metal to hedge against inflation offsetting the bonds we purchased.

Both examples are “events”, and we sold down the road. How do you distinguish from speculation investments versus core holdings when it comes to metals?

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CHUCK: Short-term traders, live and die by each positive move the metals make, so they can sell and take a profit… These are a different breed than those of us who need to sell a portion of our holdings to pay for something – hoping all along that we are never in a position of being forced to do so.

Remember, Gold & Silver are insurance programs against inflation, dollar collapse, and runaway debts. We had all better hope that we never have to use our insurance programs, because if that happens, then all hell has broken loose in the economy…

And if you believe the Gov’t and their BS (BLS) reporting of Inflation, then you have no need for Gold… But if you don’t live under a rock, and you have to buy groceries, insurance, clothes, medicine, etc. you know that the Gov’t lies to us regarding inflation… In my opinion, it’s not going away… Because inflation at its root is Money Supply, and the U.S. after a year of slowing money supply, have ramped up Money Supply once again… rising inflation won’t be too far behind.

Tying this with the first question, I tell Kathy, we buy some investments to sell at a profit down the road. We buy gold for a different reason, insurance as I mentioned. You need the insurance as long as you are at risk. The risks of inflation are as bad as I have ever seen – therefore we should hold our insurance.

DENNIS: Recently Bill Bonner wrote:

“‘All roads lead to inflation,’ says celeb investor Paul Tudor Jones.

…. Ultimately, almost all major governments are spending too much money. We know where that road leads. Politically, they can’t control spending. And financially, they can’t control the value of the dollar. As they borrow, print and spend more…dollars will go down that long, winding road to peso status.

In the venerable tradition of tyrants and jackasses everywhere, politicians will debauch their own currencies in order to keep the wheels turning and the cash flowing. Dollars, pounds, euros, yen…all will go down compared to real things, including gold.

The talking heads on Bloomberg are already counting their profits. They think gold is an ‘investment.’ They talk about the ‘gold trade’ and hope to make money by buying and selling, in and out, in a timely manner.

…. The US government no longer operates on a gold standard. But we do. We use it to protect us from crashes, inflation, and major bear markets.

…. What’s more, when a ship goes down, people don’t like to give up their life preservers.

And in a financial crisis, people don’t want to trade their gold for a tuna sandwich. That’s Gresham’s Law; bad money drives good money out of circulation. People don’t spend gold; they hoard it.”

While Bloomberg may be “counting their profits,” I am not. I’ve referred to gold as a “fire extinguisher” to be used in case of emergency. I like his analogy of a life preserver.

One final question. Chuck, is it possible for us to buy, sell and hold all at the same time?

CHUCK: Absolutely!

Let’s start with buy. If you feel inflation is not going away, as Jo emphasized earlier, gold is the “life preserver” to keep up afloat. If readers don’t feel they have enough, don’t let today’s prices keep you from buying.

Despite the politicians saying they will bring inflation down; it does not reverse the damage already done; nor will they succeed in keeping it down in the future.

As to “selling”, there are circumstances when it is appropriate. If you feel there is a significant dip in the market price, load up some for your life preserver, and also set aside some more to sell down the road. The key is to earmark it when you buy it, and keep it separate in your thinking. This could be metals or mining stocks which are more liquid and less expensive to trade.

When you do so, I recommend setting price targets, and stop losses to control your risk as you are speculating. As the market becomes more volatile, I’d imagine some speculators will do very well.

The “hold” is what I have referred to as core holdings. Generally, this is physical metals. What am I “holding” for? A shipwreck that I hope never happens; hyperinflation, dollar collapse, whatever – where we have to liquidate in order to survive.

I have some metal that I hope I never have to sell …. and when my children inherit it, I hope they never sell it. When I constantly ask “Got Gold?” I am referring to core holdings, your life preserver to protect your wealth.

Dennis, thanks again for inviting me, I enjoy addressing your readers.

Dennis here. In the past I’ve held on to investments too long, hoping they will come back – only to increase my losses – or not selling when they were high, hoping for even bigger gains. It’s difficult dealing with your emotions along that bumpy ride.

Sometimes you have to take a deep breath and keep your emotions under control. When we bought our core holdings, it was for insurance, hoping we would never be forced to sell. Those investments are doing their job, staying ahead of inflation, and we are sleeping well at night.

I agree with Chuck, if you are constantly worrying about keeping up with inflation, even at today’s prices, it might be time to buy.

If you want to speculate, limit your risk. Consider some gold stocks, and you might even want to sell some covered calls to increase your return.

Is it time to buy, sell, or hold? Yes, to all….

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Quote of the Week…

“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.

Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” — Alan Greenspan

And finally…

I’ve mentioned several times how much we love rural Indiana and the hometown feel. Friend Fred M. shares some rules from this part of the world:

• OK, we’re impressed with your $60,000 car. Grain farmers have $750,000 combines that they drive only 3 weeks a year.

• Every person in rural Indiana waves. It’s called being friendly. Try to understand the concept.

• Yeah, we eat taters, tenderloins, gravy, beans and cornbread. You really want sushi and caviar? It’s available at Jim’s bait shop…

• The ‘Opener’ refers to the first day of deer season. It’s a religious holiday held on the 15th of November.

• We open doors for women. That applies to all women, regardless of age.

• There’s no ‘vegetarian special’ on the menu. Order steak. Or you can order the Chef’s Salad and pick off the 2 pounds of ham & turkey.

• When we fill out a table, there are three main dishes: meats, vegetables, and breads. We use three seasonings – salt, pepper, and ketchup.

• Let’s get this straight; it’s called a ‘dirt road.’ I drive a pickup truck because I want to. No matter how slow you drive, you’re going to get dust on your Lexus.

• College and high school football/basketball are as important here as the Colts and the Pacers…and more fun to watch.

• Four inches of snow isn’t a blizzard – it’s a flurry. Drive in it like you got some sense, and DON’T take all our bread, milk, and bleach from the grocery stores.

• By the way…if you want to talk to God in Indiana, it’s a local call.

And my favorite:

• Colleges? We have them all. We have State Universities, Community Colleges, and Vo-techs. Folks come outta there with an education plus a love for God and country, and they still wave at everybody when they come for the holidays.

Until next time…

Dennis Miller

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

 

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