Now's the Time to Get Gold

 | Sep 19, 2011 | 2:54 PM EDT
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The papers are filled with doom and gloom right now. Let's count 'em: Treasury Secretary Tim Geithner didn't seem to get much done in Europe so we have another terrible day for the Euro, worries about higher consumer prices without higher growth have people buzzing about stagflation and there's no let-up in residential housing prices in China. This is all within the last 72 hours.

Pretty grim, right?

Unless, that is, if you think about the prospects of what it might mean for gold, which, bizarrely, was down today, giving you another chance to get into the precious metal.

Why was it down? Oddly, I think it's because Europe isn't collapsing and the reports of it getting out of control are greatly exaggerated. I reiterate the faith I feel in what Tim Geithner said last week that there will be no more Lehmans. If that's the case, and the market seems to be saying it with gold not soaring, we have more ways to win than just gold.

More importantly, I want to call you attention to the strength in the individual gold shares, which I now think are ready to take off after a prolonged period of consolidation and underperformance vs. the actual metal. First, Newmont (NEM) hit a 52-week high today, in part because it is talking about a bountiful increase in its dividend as gold goes higher. The gold stocks of yore, like Homestake here, and the big South African mining companies, used to pay the highest dividends of all stocks. I think that can happen again.

Second, there's consolidation. Agnicos-Eagle (AEM) paid $255 million Canadian dollars for Grayd, a terrific miner with properties in Mexico.

Third, many companies that spent fortunes in the last years to take advantage of the higher price of gold by opening mines with alacrity are now beginning to reap the benefits of the expansion. In particular, there are two companies that must be bought for this reason, Randgold (GOLD), which has a huge expansion in Africa and Goldcorp (GG), which has spent a gigantic amount of money to develop a monster mine in Mexico that is just now beginning to pay off.

The time is ripe for gold again. Do not be dissuaded by today's decline. It's just another opportunity.

Embrace it. They don't come very often and when they do, those of you who don't own any should use the moment to start working your way toward a position in gold that is at least more than 10% of your portfolio with an optimum, in these uncertain times, of 20%, before you should feel safe in this ridiculously uncertain world, where the race to debase currencies to raise exports is at an all-time high.

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