Stocks Up Gold's Up! What's Up?

One of my business associates commented today, "I thought when stocks were up gold is supposed to be down.Today they're both up.What's up with that?"

Actually, it's become quite common to see both stocks and gold rise and fall in tandem.In a prior writing, on a day when both stocks and gold were down, I was asked basically the same question but backwards.Why are both stocks and gold down if gold is a safe haven?

My answer to that is essentially two-fold.If I am losing money in stocks that I bought with borrowed money (on margin) I may need to sell something I have profit in, in order to cover margin calls.So I sell my gold, which of late, has outperformed stocks, still.

My other explanation presents a more positive twist.I lost money in stocks so now is a good time to take profit in gold (likely paper gold) so I can realize a gain without tax consequence.This strategy eases the pain of loss on one side of the transaction with a reward on the other by making Uncle Sam a partner in the loss.

Now, when both stocks and gold are up, I don't think you can easily identify a specific strategy someone is using to take advantage of the situation.I think the answer is a little outside the investment strategy box.I've always had a theory and today I got some evidence that the theory may hold.

I saw a brief story today relating to gold demand.Apparently, yesterday, there was massive volume in gold and silver.One analyst saw it as a signal that central banks were buying as such volume is not achieved by you and I adding a few gold coins to our savings and reitrement accounts.

As a rule, central banks don't talk about plans to buy gold or precious metals as such announcement has too much potential to drive the gold price up or down.Case in point?China!Last year China secretly doubled its gold reserves.They bought it and no one knew until months later.Then in order to make light of their action, they announced they had faith in the dollar and gold was - well - maybe ok to have but it's lack of utility prohibits too much buying.Lack of utility being it does not produce income like stocks, bonds, etc.

So, here's my theory.If I was a central bank and I wanted to buy gold or silver without calling too much attention to the deed, I would use a rising stock market as camouflage - a diversion if you will.The average investor is likely transfixed on a stock ticker when stocks are rising and paying little attention to precious metals.And if they do pay attention, so what!My stocks are up and who needs gold?

Then when stocks are on the way down, the bank may sell some gold to help hold gold prices lower in order to dispell the belief that falling stocks should mean rising gold.So why the charade?He who holds the gold makes the rule.You can bet that in the event of a major collapse of world markets, central banks want to own as much of the gold as there is.They don't want you to have it that would mean you are free of their control.

Right now gold is the average guy's secret weapon against total monetary collapse.If you own gold and you have debt when this occurs, guess what?You take your gold, exchange it for the currency with which you have denominated your debt and you pay back the banker with the worthless currency he has been trying to rid himself of.Talk about financial justice.

Debt is fixed gold is not!If we see $2000 gold next year, your fixed debts can be paid with dollars worth 50% or 60% less than they are today.That's why central banks want to buy gold in secret.They don't want you to catch on.That's what's up.

If you want to own gold as your secret weapon against monetary collapse, call the Lear Capital Gold Hotline (1-800-214-8417) or visit us online for the best price on metals anywhere.