Doubling Down on Doubloons

12/01/2009 12:01 pm EST

Focus: ETFS

Jack Adamo

Editor, Jack Adamo's Insiders Plus

Jack Adamo, editor of Jack Adamo’s Insiders Plus, says he thinks gold could go much higher, and he’s buying more whenever there’s a correction.

“The hardest thing in investing is to ride a bull market all the way to the end.”—Richard Russell

[Russell] is 85 years old and has been writing about the market since the 1950s. [He says] that the psychological pressure to lock in your gains when you face a rough patch is very strong.

There have been numerous gut-wrenching corrections on the way up, but gold has continued to rise inexorably. Each time it pulls back, the media give reasons why it was just a bubble and it’s deflating.

They’re wrong. Gold is simply the inverse of the dollar, which is worth less and less every year. The dollar has its short-term reversals, but that’s all they are, just as gold’s pullbacks are short-term corrections.

What is the top for gold? I don’t know. But I know it isn’t there yet. How? Because the vast majority of the public still doesn’t take it seriously. What happened to tech stocks, oil, [and] housing will happen to gold. It will have a parabolic move.

When gold is near a top, it will be all over the mainstream media, not just the financial media. People will say buying gold is a no-brainer, and we’ll probably hear numbers like $8,000 an ounce or more. Miniature gold bullion will be sold in fancy department stores here, as it is now in England, or even in vending machines, as it is in Germany. We’re nowhere near the end yet.

Jim Rogers was interviewed [recently,] and said he likes all the precious metals and thinks gold will break its old highs, adjusted for inflation, which would be over $2,000 [an ounce].

Rogers’ “smart money” assessment of oil prices led me to load up on the energy sector during its big move. I think he’s right on the metals too.

So, I’m going to bite the bullet on any corrections, and increase our gold positions now. They will be for the long haul, until I see one of my own indicators say it’s time to get out for a while or for good. I don’t expect that to happen soon.

ETF Physical Swiss Gold Shares (NYSEArca: SGOL) is a buy up to $114. (It closed below $118 Monday—Editor.) Market Vectors Gold Miners ETF (NYSEArca: GDX) is a buy up to $52. (It closed above $51 Monday—Editor.) Compania de Minas Buenaventura (NYSE: BVN) is a buy up to $40. (It closed around there Monday—Editor.)

I believe [GDX] is where the money will flow when the gold miners finally go parabolic. I prefer the Swiss shares [to streetTRACKS Gold Shares (NYSEArca: GLD)], because custody is outside of the US. The US forbade private citizens to own gold once. It’s not likely, but in case that ever happens again, I’d rather have my gold in Switzerland.

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