Oil down, stocks down, gold up!

The TSX got hammered pretty hard last week, and given how oil is trading right now I think we can expect another rough day when trading begins on Monday morning. The most amusing thing about the big sell-off on Thursday was how gold corrected by about 0.5% only and there were various “experts” on CNBC and Bloomberg talking how this was some kind of notable event and gold was set to reverse.

These people have been wrong on gold from the beginning. You should not listen to anyone like this, because they are not paying any attention. They seem to ignore that central banks are buying gold like crazy. South Korea’s central bank bought gold for the first time in 13 years.  Russia, Mexico, Thailand… their central banks want gold. Chinese and Indian people with their rising incomes want gold.

Here is a one-year chart on the gold price.

When it was $1000 an ounce, people said it was a bubble. In 2010, it just wasn’t the right time to buy gold (what the hell, Mr Ferguson?).  It’s a “barbarous relic,” they say (is Nouriel Roubini an idiot or what?), or “it doesn’t do anything,” say others (Buffet is an amazing investor who completely fails at economics). Even people who were generally favorable to the concept of investing in gold timidly said, “Well, it’s gone up so much, it’s too expensive right now, maybe I’ll buy it on the dips, neuhrg...” All of this was completely wrong. And it is still completely wrong.

When something rises so quickly, one would normally be wise to be skeptical. Yet gold’s price in the modern era does not represent a “normal” situation. Currency crisis is coming. Europe is basically going straight to the ninth circle of economic hell. The ECB has pledged to buy all the bad debt in Europe. QE3 through 13 is coming from the Fed. You can count on it.

This is all positive for gold. What is bad for gold’s price? Deflation — but we don’t face deflation, at least not until the final phase of the crisis, when the Federal Reserve and other central banks finally say, “No.” We still have a ways to go, I promise. This is Bernanke and like folk we’re talking about, after all.

Instead, what we face now is systematic, global currency depreciation. That will ensure gold will continue to rise for a long time to come. Buy yours now — start with a single coin or two. Work your way up to $10,000 in coins by the end of 2011. I strongly anticipate gold to reach $2000 by year’s end, and even then it will have a lot of assured upside.