They both can't be correct.... Most of the talking heads on TV (there are exceptions like Peter Schiff and Micael Pinto) feel gold is either over priced or in a long term trading range while most of personalities on King World News (KWN) feel very strongly that precious metals will continue much higher due to worldwide debt, deficits, and the continuing printing of fiat currencies. One thing for sure, both views can't be correct.
Let's review gold (YE close) since 2000. Gold (in $US terms) has gone up for the past 12 years. Gold has gone from 273.60 to 1675.00 (+512.2%) from YE 20000 to YE 2012. The alternate way to look at it: The $US has declined by over 500% over the past 12 years. Stated another way, the $US has declined from $1.00 (YE 2000) to $.01645 (YE 2012).
Question at hand: Which will be stronger over the next 1-5 years...gold or the $US. I know gold is down 1-2% over the first week of 2013. Big deal. My question is will the $US get stronger (vs gold and other commodities) over the next 1-5 years or will it continue to weaken. (if it stayed neutral then no harm, no foul. You could be in either.)
As I have cited previously, there is an ad on TV saying if you were given $50,000 (in cash or gold) and could not cash in for 5 years, which would you rather have. I love the ad because it prompts one to think in terms of the macro forces and long time frame rather than the day-to-day MP price actions.
What will the US debt look like in 5 years. Will it be only $20T or closer to $22-25T. At $22T, every 1% increase in interest rates would result in $220B more interest each year.
Let's look at what to do. Physical metals, mining stocks, PM ETFs, etc. all have advsntages and of course disadvantanges. IMO, the three best alternatives (in no specific order) are SLW, FNV, and a mixture of SAND/SSL and STTYF/SND. Currently, my mix of SAND and STTYF is 80/20 towards gold.
Hope this is not too long, but just felt compelled to present the macro and long term pictures. If my health permits, I'd like to revist the macro picture every 6 or 12 months. This would look at the price of gold, maybe silver, and certainly SAND/SSL. Just keep in mind, in truth, gold does not really go up...rather the $US weakens. IMO, SAND could out preform gold by 20-50% yearly for the next 5 years. GL for 2013 and beyond!