Wednesday, September 7, 2011


There are growing signs that gold is looking toppy. Yet most people are NOT overinvested...

WAY BACK in 2002 – and in 2003 (and 2004...) – my dad told me the following:

"Son, I'm behind you in everything you do...But there's no way I'm buying any gold."

This was his reason:

"Son, I bought gold Krugerrands in the late 1970s, and I'm still down on 'em 25 years later. Gold is never going up."

In the nearly two decades I've been analyzing investments, my dad bought just about everything I recommended. But he drew the line when I recommended gold in 2002, writes Steve Sjuggerud in his Daily Wealth email.

I thought, "Wow. Now this is what a bottom looks like...when even my dad doesn't trust me on this one."

Back then, the gold story was simple to me...

Gold is financial catastrophe insurance. When is catastrophe insurance the cheapest? When there hasn't been a financial catastrophe in decades. In the early 2000s, that's where we stood. So I recommended buying gold. It wasn't about being a gold bug. It was about buying something cheap.

Back then, my parents bought everything I recommended – except gold. And my in-laws were starting to do the same. But they drew the line at gold, too. They thought I was nuts.

What really did it was when I started recommending Gold Coins in 2003. Cancellations to my newsletter started pouring in. The typical letter said, "Steve has always had outside-the-box ideas, but this Gold Coins garbage has gone too far."

I'd never seen such a hated asset class. I personally believed gold could absolutely soar. And readers who actually took my advice and bought my 2003-recommended MS-63 Saint-Gaudens Gold Coins made hundreds of percent profits.

Now, nearly a decade later, the situation is much different...

Gold has gone up 10 years in a row. My in-laws now have a big portion of their portfolio allocated to gold investments. And all this week, CNBC is having a special called "GOLD RUSH," where the commentators are in underground gold mines in South Africa.

A decade ago, you could hardly get a quote for gold on CNBC or Yahoo Finance. Today, gold quotes are on the front page.

If you want to make hundreds of percent on an investment, you have to buy it for pennies on the Dollar, when nobody wants it. With a week-long gold special on CNBC, it's hard to say nobody wants it.

In short, it feels like we're closer to a top than a bottom in gold. On the other hand, the numbers we track tell us we might not be at the top yet, because most people are NOT overinvested in gold.

The details are complicated. But the basic thought is simple: People are watching gold go up, like spectators watching from the sidelines. They are not active participants...yet.

Colleague Chris Weber explained the situation best recently:

This kind of market [in gold] is the dream of an investor like me. A bull that is so quiet and so looked down upon by most people...If you are just coming on and are hesitating to put too much of your wealth in the area, I can say without worry that there is still a lot of room, and time, left.

I believe Chris is right. There is more upside. It sure doesn't feel like the real estate boom, or the dot-com boom yet, when EVERYBODY is in. That's when we're at the top.

Gold will certainly have extreme corrections. On its march from $35 to $850 an ounce in the 1970s (peaking in January of 1980), gold lost HALF its value multiple times. But I don't believe the top is in yet.

View writer profile, Steve Sjuggerud,

Former stock-broker, mutual-fund vice-president and hedge-fund advisor Dr. Steve Sjuggerud is the founder and editor of True Wealth. Launched in 2001 and now one of America's best-followed newsletters for private investors, True Wealth also provides free analysis and ideas in the Daily Wealth email service.

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