Gold Has Some Real Upside Here

11/06/2012 7:45 am EST

Focus: COMMODITIES

Curtis Hesler

Editor, Professional Timing Service

You don't have to be a gold bug to think about putting some gold into your portfolio, especially in one of the precious metals' most volatile time of the year, observes Curtis Hesler of Professional Timing Service.

Gold will continue to rise because the dollar will continue to lose purchasing power due to the piling on of national debt. As the dollar declines next year, its weakness will be glossed over with the excuse that a weak dollar is good for exports.

If you haven’t read it already, pick up a copy of The Fourth Turning by William Strauss and Neil Howe. Long-term trends are set in place. They don’t change because of an election, and good times are not around the corner.

Another reason gold will continue to rise until the bear market in paper assets is over is that everyone else on the planet is struggling with a decaying currency. Americans are not the only ones trying to maintain purchasing power; but luckily, America is still the leper with the most fingers.

That means when the dust settles and the bear market in paper is over, America will represent the most fertile investment environment...but let’s not get ahead of ourselves. That point is a good five to seven years down the road. We will see it coming when the Dow/gold ratio falls to 2 or less from its current level of about 7.70.

I think that if you do not yet own gold, the time will soon come when you will very much wish you did. We have seen a nice correction over the past year as gold was basing at the $1,500 to $1,550 level. Of late, the profit-takers have taken some money off the board, and gold has settled back to support at $1,700. Obviously, this is not as advantageous as buying last summer and fall, but purchases at today’s prices will be better than buying at tomorrow’s higher prices.

Gold is volatile, and there is a very remote possibility that it could break back to $1,600. I give that very slim odds, but consider $1,600 a “back up the truck” buy point for bullion.

As time progresses, you should consider the marginality of investing in gold. There is a good deal of profit to be made yet, and I believe the risk to reward solidly favors gold at current prices.

However, the higher price one pays, the greater the risk and the less the potential reward. In a nutshell, as I fade into retirement, I am telling you to buy into weakness, hold your positions for further gains, and do not chase prices on the up side.

In parting, I am confident with purchases in Royal Gold (RGLD) at $80 or better, which is not out of reach. I am increasing the buy price of Yamana (AUY) to $17 or better and Central Gold Trust (GTU) to $64 or better.

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