Don’t Look a Gift Horse in the Mouth! Now’s the Time to Buy Gold, Not Sell It

So says Peter Schiff (www.europac.com)  in edited excerpts from an article* originally posted at www.TheDailyBell.com entitled Peter Schiff On the Recent Gold Pullback.

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So wrote Schiff in an earlier article that is more appropriate today than ever and which continues in an edited excerpts format below:

UNCHANGING FUNDAMENTALS

It’s important to understand the fundamental reasons for owning gold, and those reasons have not changed. The U.S. government embarked on a decades-long spending spree of historic proportions. To finance the resulting debt, the Federal Reserve is printing money furiously. Because most every central bank governor appears indoctrinated in the Keynesian economic philosophy, foreign central banks are simultaneously printing euros, yen, francs, yuan, and pounds to “keep up.” Of course, this competitive devaluation actually represents countries shooting themselves in the foot.

Don’t expect any abrupt changes [in the abovementioned approach], either. The Fed’s philosophy – a resolute faith in central planning and debasement – has been unchanged since Paul Volcker stepped down as Chairman in 1987. Rather than considering any change of direction, the Federal Reserve Board…under Ben Bernanke has literally instituted a revolutionary devaluation program for the dollar – and gold is the only way to avoid his guillotine.

TRUE VALUE VS. SPOT PRICE

Let’s remember that it is the fundamental value of an asset which dictates its long-term market price. Yet for some reason, many see this relationship backwards – they use the short-term market price to extrapolate the fundamental value. Consider a car on the dealer’s lot: if the price of the car falls tomorrow, it becomes a better deal. If the price rises tomorrow, the car has becomes less attractive. This principle is equally true in long-term investments. I believe that gold’s fundamental value is far higher than $1,600, and far higher than $2,000. So, while it may be unsettling for some of those who own gold to see steep short-term price declines, remember to focus on the fundamental value of the asset, not the spot price on the market today. Has the fundamental value of gold fallen in these past two weeks? Quite the opposite…so why are investors responding by selling gold…I was always told not to look a gift horse in the mouth.

KEEP CALM AND CARRY ON

Do not get caught in the exuberance or pessimism of short-term movements, even if they’re sharp. Observe the fundamentals – the events in Europe, the looming budget calamity in the U.S., central bankers’ steadfast strategy of debasement, and emerging markets’ continued diversification into precious metals. These are the main drivers for gold’s long-term appreciation.

To my readers who may have purchased metals just before this pullback, your concern is understandable but I believe this bull market has a long way to run, and the rise up ahead looks even steeper from these levels.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://www.thedailybell.com/3016/Peter-Schiff-On-the-Recent-Gold-Pullback

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