Useful Advice From Richard Russell

It's easy to get caught up in fear when gold slumps, as it has recently, so these words from Richard Russell (reprinted by Pierre du Plessis) should be taken to heart:

“Lately there’s been a tide of uninformed warnings to the effect that gold is in ‘a dangerous bubble’. These anti-gold know-nothings haven’t seen a gold bubble yet, but I’m predicting that a phenomenal gold surge (call it a ‘bubble’ if you like) lies ahead. The only thing the recent gold correction has accomplished is to encourage the gold-haters and to knock the amateur traders out of the gold market.

“Gold is in a true primary bull market, and the bull’s number one task now is to rise with as few riders on his back as possible. This is the reason for recent erratic (and probably scary) gold action. As for my subscribers, my advice is ‘Disregard the amateur warnings and ride the bull’.”

Gold's an asset that elicits emotions not only because it's dumped on a lot but also because there's no metrics to value it like P/E ratios and dividend yields for stocks. The ultimate long-term reason for holding gold is in anticipation of a renewed gold standard. There's been some talk along those lines, but a real gold standard is far away. Since gold is also a wealth-preserver when fiat currencies waver, alternate metrics come into play like inflation and currency devaluation rates.

Lately, there's been an improvement in the picture thanks to the negative real rate buy signal. When short rates are below inflation, gold's a buy; when real rates shoot up above inflation, it's a sell. This metric says unambiguously to hold on to the gold.