The Gold Market Discussion with Jim Clark: Gold is a Ballast

The Gold Market Discussion with Jim Clark: Gold is a Ballast

by Jim Clark


This last week I have been at the World MoneyShow in Orlando, Florida. The energy and interest around our booth has been quite intense. Well, with all of the volatility in the markets there are many concerned investors who are wondering what their next move should be. News of the day’s employment numbers created an impression of a robust economy and sent the stock market up. Yet, no one I talked to today, including many experts as well as investors, believed the numbers reflected the real state of the economy, which is understandable for several reasons. One reason is that labor force participation has steadily declined since 2007 and hasn’t regained ground during this anemic recovery. Also, many Americans who have stopped looking for work are no longer counted, and many of the new jobs are part time. Goldman’s Jan Hatzius notes that wage growth is still stuck near the lowest levels recorded since the Financial Crisis of 2008. The income of a typical family has dropped 5 percent in the last three years. And though there was a good rise in the number of waiter and bartender jobs in January, the manufacturing job numbers had the lowest monthly increase since last November. On top of that, there are 47 million people on food stamps, up 70 percent since 2008. So, with all the volatility and uncertainty, does it make sense to own gold?

  1. Is the cost of living (food, medical, utilities, insurance, etc.) increasing? Yes
  2. Is government spending out of control? Yes
  3. Is there something you can own that has no debt or liability attached to it? Gold
  4. Is there something that has kept up with our increased cost of living? Gold
  5. Is there something that has no exposure to the world debt crisis? Gold
  6. Has the U.S. turned the corner on the debt crisis? No
  7. Can I get a decent return on savings interest? No
  8. Have the other nations reduced exposure on sovereign debt? No
  9. Can I get a good return on a CD? No
  10. Has the government resolved to reduce its balance sheets? No
  11. Does the government have plans to reduce to national debt or reign in its spending? No
  12. Does printing money decrease the purchasing power of the dollar? Yes
  13. Do low interest rates mean deposits are losing you money while the cost of living is going up? Yes

Gold represents a smart hedge in an uncertain global investment climate. Matt McLennan, who oversees $93 billion in assets in the First Eagle Global Value Fund has stated on CNBC’s “Halftime Report” that his portfolio held 70 percent of its assets in equities, 20 percent in cash and 10 percent in gold. He noted that gold tends to perform well “when risk assets are out of favor and vice versa,” and also stated that, “I think what I’d say is that we’re in an environment where risk assets are trading at rather elevated levels relative to history on the back of very easy policy.” And Mr. McLennan put the case for gold very well when he added, “Suffice to say if you think gold is an important part of the ballast of a portfolio, and if you can get it at a discount, that makes sense. Gold at a discount with a yield seems to make sense to us as part of a long-term investment portfolio.” I particularly like how Mr. McLennan described gold as a ballast. A ballast limits the electrical current through a circuit preventing explosions and short circuits. Gold is a ballast. It will protect you in an economic crisis. And, at the present price, it is the perfect time to buy. In addition:

  1. Gold has been increasing in value by over 20 percent annually for over a decade, consistently.
  2. Gold has no debts or liabilities attached to it.
  3. Gold doesn’t require the full faith and credit of a government.
  4. Gold historically has always kept up with or exceeded cost of living increases.
  5. Gold thrives on uncertainty.
  6. Gold cannot be printed.

So get some peace of mind regarding the next financial storm and purchase some gold as a ballast for your portfolio. Call one of our experienced precious metals experts today.

I’ll be keeping a sharp eye on the market and I encourage you do the same!