Got Bullion?

Gold has now been in a bull market for 10 years. Everyone, but the most dim witted of "asset-allocation" advocates can see that gold deserves a place in every portfolio.

Still, only 2 percent of registered financial advisors recommend gold. The reason for this is twofold. A) asset-allocation models presuppose that all financial advisors and all of their clients are complete morons and can not possibly have any point of view on the markets - other than that over time they will rise - and the rise of gold suggests that even this is wrong, and that financial markets may well fall again. And b) Financial Advisors don't get kick-backs from bullion dealers or Gold ETF's.

Everyone but these dim wits can also see that when the investing public finally start to think for themselves they will want some gold. Therefor, the big rise in gold is still somewhere off in the future when the investing public gets involved.

However, what is most difficult to accept, even for many long time gold bulls, is that gold will eventually reassert its historical position as the world's reserve currency.

This point of view still appears radical.

Most people - even most gold bulls - tend to think that though the current problems are severe, they will get worked out (somehow - nobody knows how) and then the gold bull will be over. So for them it's just a question of when to get out of this very profitable (paper) trade.

There are three reasons people cling to to justify this position.

First, they say, we've had severe problems in the past and we've always worked them out.

This position is clearly illogical and hope-based. You could argue against it citing every historical example of paper money returning to its intrinsic value (zero) but why bother? It's like arguing against a religious conviction.

Second, they say, the United States may be having problems but we still have the deepest, safest financial markets in the world.

This is partially true. It is true for Apple, and Google, and Facebook, and Exxon, and 3M, and Alcoa. But it is not true for our, inefficient, lazy, corrupt bankrupt banking system. And to the extant that it's true, it is an argument as to why the United States won't dissolve, not why the dollar won't be replaced by a more stable currency.

Third, they say, there's just not enough gold to back the world's currencies.

To this, the simple answer is that there is plenty of gold - at the appropriate price.

Is it really so hard to imagine that the IMF, the ECB, the Fed, The Chinese, Russian, and Brazilian Central banks, OPEC (Or some strong armed combination thereof), getting together and agreeing to some gradual shift to gold-backed currency?

Would it be hard to imagine that day arriving, sooner rather than later, on the back of world wide food riots (already happening), sky-rocketing oil prices, and yet another global banking crisis?

The only thing preventing this from happening today is Confidence in the stability of the dollar. Is it so hard to imagine that confidence wavering?

You'd better try real hard to imagine this. Because if the shift is not gradual - for any number of reasons - and you're not prepared, you'll go broke.

Let's assume, for a second, that his far-out scenario comes to pass. What would happen to dollar denominated assets, including gold stocks and gold ETF's? This is a terribly complex question, and to answer it properly one must account for the settlement of hundreds of trillions of dollar denominated debt.

It's possible to envision many scenarios. But under every possible scenario you will see a decoupling of the Bullion Price of gold from all paper forms of gold. In other words the PREMIUM charged to buy an ounce of gold will go through the roof, as demand for the Bullion rises.

Whether or not your paper gold will go to Zero is debatable. But if you think this through, it should become clear that you want your gold in bullion form. And to have a prayer of getting it that way you should start right now.