I have three boys, ages 2 through 10, which means I have spent a lot of time over the last 10 years reading every children’s
book ever written. One of our all-time favorites is a story called “Pirate Pete.” After all, little boys and pirate
stories are usually a good match. Pete’s favorite saying is, “Where there’s gold, I’m a-goin’!”
It looks like Pirate Pete wasn’t the only one chasing gold this year. Pete’s passion rose more than 25
percent in 2009, with silver up even more. More impressive than the return is the fact that the Dow Jones industrial average
is still almost 40 percent below its all-time high, while gold was recently selling above $1,200 an ounce, making it the only
asset class I can think of that was hitting new highs in the last few months.
Gold has maintained its long-term
bull-market run that began in 2001, and it doesn’t look like any major interruption is coming soon. Eight years is a
long time to sustain an upside move, but, remember, equities more or less kept moving higher for 18 years starting in 1982.
Another aspect to consider is that gold was pummeled from 1980 until 2001, and that has created a very long base that
is helping support prices now.
Over the last few years, I have been vocal about my bullish opinion about gold.
I started laying off a little six months ago when it was breaking above $1,000, and as it approached $1,200, I was in no mood
to chase it. But a few other big investors didn’t have my fear of heights and plunged anyway.
government announced a major gold-buying campaign and China has been encouraging its citizens to put some of their savings
into gold. It was right about that time that the metal decided to encounter a correction, with current prices about 10 percent
off the all-time high set in November. There were a few days last week that saw trading at a little under $1,100 an ounce,
and that has me thinking there could be one more opportunity to get a little of the pirate loot before the rest of the world
takes it to the moon.
Sometimes there is a cyclical nature to assets, and gold is no different. I don’t bet
the ranch on seasonals because there are too many outliers, but they are a good indicator to keep an eye on.
is not unusual for gold to experience weakness in the spring. If the correction of the last few weeks is the beginning of
another seasonal dip, then a good move is to get ready to buy in the spring of 2010. Anywhere around $1,000 an ounce makes
sense to me. That would mean about a 20-percent pullback from recent highs. I think that is about as bad as it could get over
the intermediate term.
The Asian buyers are going to keep coming for it, and now many Western investors are trying
to buy more gold as an inflation hedge. Even though inflation hasn’t taken hold yet, it is coming. It may not be next
year, but within the next three years, we will see inflation above 5 percent. That should be enough to take gold to $2,000
an ounce at least. The longer-term prospects look good.
Stocks should start the first quarter of 2010 pretty much
where they left off in 2009. Equities could experience a 5-percent to 10-percent correction at any time, but that would create
another buying opportunity. Things could change in late February or early March, and maybe not for the better. But for now,
the message is the same: Hold the course and buy on dips.
I wish everyone a healthy and happy 2010.•
Hauke is the CEO of Samex Capital Advisors, a locally based money manager. His column appears
every other week. Views expressed here are the writer’s. Hauke can be reached at 203-3365 or at email@example.com.