by Robert Hamburger
George Bernard Shaw said, “You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.”
I first started accumulating gold in 1993. The price was $330 an ounce. By 2001, when George Bush took office, the price had dipped to $280. Just as his father and Ronald Reagan had presided over ever larger deficits while championing smaller government and reducing deficits, I sensed more Republican recklessness coming and I began to voice my pro-gold opinion even louder. During the Bush years our budget-signer-in-chief nearly doubled the national debt by spending $4.9 trillion more than we took in.
By the time Barack Obama took over, gold was $840 an ounce. This morning’s price is $1,380. Mr. Obama also speaks to reducing the deficits, yet the debt has grown from $10.6 trillion to $13.8 trillion while he’s been at the helm.
Though I did not have a blog in 2005, I wrote the following to those on my mailing list at the time:
“What it [investing in gold] really boils down to is that I am betting against the U.S. economy. I don’t like betting against the U.S.A. – I love my country just as much as any other American. However, I am willing to bet against our politicians and the business leaders. Simply, I believe that “they” sold our interests out long ago, and most of us are too dumb to know any better. The Scott Peterson murder trial is still one of the top news stories while I barely hear a peep about the allegedly illegal activities of our vice president’s former company, Halliburton.”
Gold has gone up 390% in the Bush-Obama era. Still, less than 5% of Americans own gold. When the Common Person gets in on the bull market, I believe the bull will reach for the sky.
Where is gold headed? Lao Tzu said, “Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.”
However and having said that, I subscribe to theory the Dow/Gold ratio eventually being 1:1 – the day when the price of the Dow Index is the same price as an ounce of gold. The ratio has occurred twice before, during the Great Depression, and again in 1980 in the years after Richard Nixon closed the gold window.
Should we again see the price of gold and the Dow equal one another, I believe it will most likely occur in the neighborhood of $3,000 to $5,000.
As always, time will tell.
Copyright 2010 HamburgerStand.com
Robert Hamburger…”Burger” to his friends…is a businessman and thinker living in Telluride, Colorado.