What are some catalysts for a dynamic upward shift in the direction of precious metals?
''If I were good about timing, I'd probably be sitting in Monaco. In the letter, I tossed out a bunch of things that could be problematic at some point for the financial markets. Any one of them could be the catalyst that changes the psychology for the gold market. They include a bear market in stocks, a rise in inflation, or geopolitical issues. All three factor in to the way people look at gold. For any market, you can't really say what the flash point is. But there is a fair amount of complacency among equity investors -- a feeling that we can party on until we all know when to get out.
Please sum up your case for investing in gold.
The central thesis and rationale for owning physical gold is that the radical monetary policies put into place since 2008 to rescue the financial system will become problematic. What's more, Federal Reserve officials seem to be so comfortable saying that the unwinding of quantitative easing will go smoothly. But maybe, from the point of view of someone who is thinking about investing in gold, that unwinding won't go smoothly, and will lead to disruptions in the financial markets.
We have abnormally low interest rates because that's where central banks want them. The Fed achieved that goal by buying up Treasury issues. The valuation of financial assets is based on unrealistically and unsustainably low rates. When your discounted-cash-flow model is forced to adjust to a higher level of interest rates at some point -- and we don't know when that will be, but it will take place -- that could be very disruptive.''