Sunshine Profits

In the classic 1964 movie Goldfinger, James Bond tries to prevent the main villain, Auric Goldfinger, from detonating a dirty nuclear bomb inside Fort Knox.

This week has brought in some calm after recent declines in the precious metals sector.

This essay is inspired by a question we received from one of our subscribers. On December 2012, we published an essay on gold and the dollar collapse in which we pointed out why you might profit from gold even if the U.S. dollar doesn’t deteriorate completely.

This was a week of declines for precious metals, very strong ones, indeed.

In the financial markets, gold is usually ascribed to the commodities category. In this group of assets you will find your good old friend, silver, along with several others metals like platinum, palladium, copper etc.

Recently, gold and silver’s performance wasn’t what precious metals investors had expected, even though it seems that this turbulence is just temporary – fundamentals are great with the Fed promising to print even more money and continuous reports on rising demand for gold and its shrinking supply.

Yesterday we saw substantial declines in the whole precious metals sector (the only important exception was palladium that actually managed to close higher after a huge price drop earlier during the day) even though the Fed announced Wednesday that it would continue its monthly purchases of $85 billion in Treasury bonds and mortgage-backed securities.

We follow up on our essay on gold and the dollar collapse from December 4, 2012. In that essay, we speculated what could happen with gold if the U.S. defaulted on its debt in real terms.

Gold fell more than 1 percent on Tuesday hitting its lowest price in nearly a month.

Today’s essay is the first one in our two-part commentary on U.S. debt and the dollar collapse.

10 days ago, in our gold and silver stocks essay, we wrote that volatility in the mining stocks sector was mostly emotionally-driven.

We have always put emphasis on the need to diversify while putting together your portfolio.