First of all, if you are one of those who think that the Gold price has "outreached" itself and is due or overdue for a "correction", please take a hard look at the daily bar chart above. $US Gold has already had a correction, a sharp correction which dropped the price from $US 540 to just above $US 490 intraday. This correction took place LESS THAN A MONTH AGO. The bar chart above goes back to March 2005. There is no other correction of anything remotely near the magnitude of the one which took place LAST MONTH. If you look back at the entire bull market since it began in 2001, you will find that significant corrections have not taken place so close together.
Does that mean that an imminent correction in the $US Gold price is impossible? No, of course not. It simply means that it is quite highly UNLIKELY. We would like to point out that any American who bought physical Gold at any time since January 1981 - that's 25 years ago - is now looking at a "profit" in US Dollar terms. More to the point, anyone who has bought Gold in ANY currency at any time in this post 2001 bull market and simply "sat" on it is now in exactly the position he or she hoped to be in when they bought it.
In a sane monetary system, one does not sell Gold to buy things, one buys things with Gold. In today's monetary system, that can and is being done in many places around the world. In the so-called "advanced nations", and in the English-speaking nations in particular, the usual form is still to sell the Gold for the paper and then use the paper to buy things. As long as that state of affairs continues, as long as there is no official tie between the Gold and the paper, as long as the paper is NOT REDEEMABLE in Gold, the same amount of Gold is going to be exchanged for more and more paper. Yes, the Gold "price" will fluctuate, but the inexorable and increasing momentum is UPWARD.
The best attitude to take towards Gold is that by acquiring it one is acquiring MONEY, a reliable money which is NOT subject to the predations of Treasurers and Central Bankers and which does NOT represent a present and future liability. All fiat paper is based on and "underpinned" by unfinished transactions. They are IOUs issued for the purpose of being "exchanged" for REAL wealth in the form of economic goods and services. This wealth has been consumed with no thought given to or provision made for the SURPLUS out of which the liability will be repaid. All historic fiat money systems have failed for exactly the same reason that a farmer fails when he does not set aside sufficient SEED CORN out of his current production. Inexorably, his ability to produce is whittled away until the point is reached where he CANNOT make up the shortfall. The global financial system has long since reached a similar state. What is happening now is that the realisation that such is the case has set in.
Over the past six years in the US, the amount of "money" in circulation and the debt levels of the "private" and "public" sector alike have doubled or more than doubled. Yet the median (half above and half below) wage in the US has remained static, or on some measures even declined. At the start of the fiat money era in 1971, a family could live comfortably and save for the future one the income of one of the parents. Now, more and more families are unable to do it with both parents working, many at multiple jobs. This is NOT because families today indulge in more "frivolous" spending than did their parents. It is because "core" payments - health care, child care, insurance of all types, taxes of all descriptions, mortgage payments, etc. etc. - have SOARED. Read this article from Harvard Magazine - The Middle Class On The Precipice.
It is obvious that the LAST fiat money induced bubble which kept the wolf from the door for millions of Americans (and Aussies and Canadians et al) was the housing bubble. It is equally obvious that the air is going out of it fast. Americans have NO buffer in the form of savings. Whatever happens to US interest rates, a slowdown of consumer spending is absolutely inevitable. With that will go any pretension to "economic growth". With that will go the tattered remnants of "confidence" which still remain. With that will come a rising concern with debt levels and the ability to repay. And finally, with that will come an increasing unease and distrust of the system itself and of the "money" which underpins the system.
That is how every fiat money system comes unstuck. It nearly happened to the US in the late 1970s. Now, all the same ingredients are there. But with the debt levels having blown out and the savings level having vanished altogether, the potential for HUGE disruption is vastly higher than it was then. So obviously, is the potential for Gold. Remember, the equivalent of $US 850 Gold in 1980 is about $US 2200 Gold today.
Remember also that in the 1970s, it took almost a decade of obvious price inflation in the realm of real economic goods and services before the public woke up and stampeded into Gold. In the US, the public did not participate in the first (1971-74) Gold bull at all because Gold ownership was illegal for Americans until the beginning of 1975.
As is the case with all bull markets, the public only really got involved in the great Gold bull of the 1970s towards the very top - the period between about November 1979 and January 1980 during which Gold soared from $US 380 to $US 850. That was at the end of a DECADE of rampant rises in the prices of REAL goods and services of all descriptions.
After almost 25 years of rampant price inflation in the realm of paper assets, the era of climbing real goods prices is just getting started. What has brought it to the attention of the public has not been the price of Gold, but the price of gas, and that only over the past year or so. In comparison to the 1970s, the attitude of the public now is about what it was right after the first oil shock in 1973. We've got a LONG way to go yet before enough of them catch on to make a difference.
Yet Gold is accelerating upward at a pace which has seldom been equalled and only once - for a short while in late 1979 and early 1980 - surpassed. This is not because of the "public", most of whom would never put "gold" and "investment" in the same sentence. It is because there are enough INDIVIDUALS, at all economic levels, who DO understand the fatal damage which has been done to what circulates as "money" over the quarter century since 1980. These INDIVIDUALS have been quietly accumulating Gold over the last four to six years.
To them, a "correction" is an opportunity to buy more, not a warning that the bull market might be over. If you understand the situation, you know that the only sure "insurance" you can get against a collapse of the fiat money system of any magnitude is the ownership of physical Gold. The people who will come out of the future collapse with the least amount of damage, economically or psychologically, are not those looking to enhance their paper wealth. They are the ones who are looking to PROTECT their wealth from paper - any fiat paper currency.
If you really want to benefit in ALL ways from Gold, don't look at the rising Gold "price" and exult in all the "money" you are making. Look at it and exult in all the purchasing power you are preserving by NOT holding paper money. What we are now in the process of seeing is not Gold going "up", it is Dollars and Pounds and Yen and Yuan and Francs and Pesos and Dinars and everything else going DOWN.