Sunday, March 15, 2009

The window of opportunity continues to shrink

for retail investors looking to diversify into physical gold. The U.S. Mint has once again stopped producing some of the coins it is mandated to create to meet demand. The U.S. Mint keeps citing "unprecedented demand" as the reason to stop making coins in yet another stab at Orwellian rhetoric/logic.

I have ranted about this before - the window of opportunity for private physical gold ownership is closing a little more each day. Those who don't understand history won't care, they'll just invest in the GLD ETF only to wake up one day to find it is yet another Ponzi scheme.

Our government is playing chicken with the rest of the world right now. We are ramping up federal debt to compensate for shrinking debt creation in the private sector and at the state level. However, if the U.S. welches on its promises to pay or Asia and the Middle East decide they no longer want to buy our debt, the "music stops" as some asshole at Citibank said a while back.

This is why gold is a great hedge! It holds its value if deflation continues and the rest of the world yields/acquiesces to our aggressive federal deficit expansion. If a currency crisis hits, gold will explode to the upside. Staying in cash via the U.S. Dollar only works with the deflationary outcome and leaves one exposed to a currency dislocation event.

I don't think our government will do another gold confiscation like they did back in the 1930s when they made prudent Americans common criminals by decree. I do see a GLD confiscation and a heavy tax on gold sales potentially in the cards down the road, which would accomplish the same thing from the government's perspective. Gold will survive and thrive in the coming environment, just like it has for thousands of years. Just don't wait too long to buy some...

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