| Urgent Editor's Note: Terrorism has struck the United States again. What does it mean for your portfolio? What do you do now? The Oxford Club's Investment Director Alexander Green just released an emergency note to subscribers. You can read it here...
Gold cratered Friday and then again yesterday, hitting a two-year low on fears that troubled European countries will have to sell their reserves to cover the cost of increasingly expensive bailouts. The sell-off took the metal below the important $1,400 psychological threshold. Gold bulls are now proclaiming that this "correction" represents an excellent new entry point before the next big rally. Gold bears, on the other hand, claim this is only the beginning of a more serious pullback. Who should you believe? Neither. No investment is more misunderstood than gold. And the prognosticators are often just as confused as their followers. For example, how many times have you heard gold bugs insist that this metal is "the ultimate inflation hedge"?
That's like calling the Titanic the ultimate luxury liner.
Between January 1980 and August 1999, for example, gold lost 68% of its value - before accounting for inflation.
Bear in mind, this whopping loss didn't just occur in the low-inflation '90s but in the hyperinflationary '80s. How any sober-minded person can call something that loses two-thirds of its value over two inflationary decades "the ultimate inflation hedge" is a bit of a mystery. | Sponsored Now Legal to "Raid" the World's Biggest Bank? The U.S. Federal Reserve now sits atop $3.09 trillion in assets. It uses that money to control interest rates, Wall Street and our very economy. What you might not know is this... Every 30 days, a handful of lucky Americans are allowed to "raid" the Fed, legally. In February 2013, they walked away with more than $3 billion. Next month, the Fed will hand them even more cash! The catch: They're supposed to spend these billions to fuel the U.S. recovery. But here's the best part...
Emmy-nominated financial reporter Jeff Yastine has uncovered a simple way to siphon some of these billions into your bank account next month. For details on this remarkable opportunity, please click here now. | Sorry... It's True Yes, gold held its value much better than paper currency over this period. But what didn't? Stocks, bonds and real estate were better inflation hedges than gold over that period... as was hiding your cash in a mattress. Undeterred by history and the facts, gold bugs often insist that runaway government spending will cause a new round of hyperinflation and a new bull market in gold. That's possible. But it also ignores the fact that the gold market - like the stock market - discounts what can be reasonably known. That's why bullion prices soared before inflation became a problem in the 80s - then promptly sold off as inflation reared its ugly head. This could well happen again. And here's even worse news for true believers. Uncle Sam's free-spending ways - while irresponsible and grossly unfair to future generations - may not result in higher inflation after all. Take Japan, for example. It was the world's second-largest economy for the past two decades. Its government debt as a percentage of GDP was far larger than ours. (Even today, it is more than 200%.) Yet note that Japan didn't have an inflation problem but rather the very opposite: deflation. Could the U.S. follow in the same path? Perhaps. We can't know. And, perversely, even if we could know, history shows us that still wouldn't tell us how it would impact the price of "the barbarous relic." In short, gold is the ultimate speculative asset class. Unlike stocks, you can't value it on sales, earnings, cash flow or price-to-book value. Unlike bonds, you can't judge it on credit history, coupons or yields-to-maturity. Unlike real estate, you can't value it on rental income or tax benefits. This decorative metal is only worth what someone is willing to pay for it. That means someone who claims to know where gold will trade in the future either isn't too bright or isn't too honest. Or both. So take my advice. Own gold and gold shares. They can be - note: can be - a valuable hedge against economic or political chaos, as well as a play on rising prosperity (since gold's unique properties will keep it in demand). But if your portfolio is overloaded with gold based on someone's cockamamie "world economic view" or "future inflation forecast," think hard. As historian David McCullough likes to say, "There is no such thing as the foreseeable future." Good investing, Alex
| Editor's Note: Alex recently shared one of his most closely held trading secrets. It's a method he's used to secure short-term gains as high as 646%. Fair warning: it's not for everyone... Alex has kept this strategy under wraps for the past 11 years for the same reason we've wanted him to share it: The sheer power... As he told us: "It's like dynamite. When used properly, it can be a very powerful tool. But when used improperly, investors can blow their thumbs off." To see the full report on this explosive technique, click here. |
   
Market Metrics Last January, Alex took a very unpopular stance with many readers. In his essay titled "Why the Gold Slump is Not Over," he wrote: "For many investors, gold is their 'forever investment,' the one asset they never plan to sell. That could be a mistake, a big one... "I'm not suggesting that anyone bail out of gold. You should hold at least 5% of your liquid assets in gold and gold stocks, and perhaps more. But if you're one of those folks I meet who has 30%, 50%... even 80% in the barbarous relic, you're really sitting at the roulette table at 3 a.m." Alex was lambasted in the comments. One reader even wrote, "This author is clueless; I suggest you ignore him." Although gold did approach $1,790 a couple times last year, or about 10%, it's now sitting at a loss of about 3%. Meanwhile, equities, as measured by the S&P 500, have surged over 20%. Although many investors believe gold is a great hedge on inflation, it actually appears to be a much better hedge on the performance of the stock market. As you can see in the chart below, there's an almost perfect negative correlation with the price of gold and the uptrend in the stock market. - Justin Dove 
Click here to view the full chart. | 
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