Everyone knows from practically my first post that Eric Sprott is my idol, and I haven't mentioned Sprott in a while, so it's probably a good time to do that.
For anyone who thinks that the worst is over and everything is hunky-dory, please read the latest (October, 2009) "Markets at a Glance" article by Eric Sprott here: http://www.sprott.com/main3.aspx?id=54.
If that article isn't enough to scare you, I don't know what is. And remember, Eric Sprott is alway right :)
Who knows how this state of affairs will eventually affect the markets, but it seems that one thing is fairly certain: the U.S. dollar is toast. Other countries have begun to recognize this. As mentioned in the article, countries have historically supported their own currencies by stockpiling about 63% of their foreign currency holdings in US dollars on average, and this number is now down to 37%.
Furthermore, today the IMF sold 200 tonnes -- or $ 6.7 BILLION worth -- of gold bullion to India. Details and commentary are here:
This was about half of a previously-planned sale by the IMF, but no one expected one big transaction like this. People are speculating China may buy the other half. This is further evidence that countries are trying to get away from the U.S. dollar. This news caused gold to shoot up from $1060 to $1085 today, even while the U.S. dollar was up.
This is great for my Sprott mutual funds holdings, which as you know are heavy in precious metals and energy. (Yes, most of my investments are still in Sprott funds, even though I've been focusing on my trials in short-term trading this last year or so). I just checked the Year-to-date numbers for the funds I'm in:
Sprott Fund YTD returns:
- Sprott Gold & Precious Metals Fund: +90%
- Sprott Energy Fund: +52%
- Sprott Canadian Equity Fund: +26%
Not bad, however they still haven't made back the brutal losses from last year. Remember, you need a 100% gain to recover from a 50% loss.
While gold could pull-back short term, I'm still a big believer in holding gold for the long term. I agree with the guys at Sprott that gold is gradually on its way to $2000 over the next few years. Everyone laughed at them at all their previous gold price predictions, but they all came true.
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