Why you need gold in your portfolio

Global currencies are losing value, miners aren't finding much new gold, and the Fed has no good news.

By Jim Cramer Aug 23, 2011 9:07AM

jim cramerthe streetThe race to debase. That's what's fueling gold right now. The desire of almost all countries in the world -- from Japan to Switzerland, from all of Europe to the U.S. -- to get their currencies down in order to export their way out of the worldwide economic slowdown.

 

When everyone believes in a weak currency, you need a strong currency, and the strongest currency is gold.

 

I have liked gold for years and years, mostly as a hedge to the chaos and a belief that it is way too hated as an asset class. I base that view on the notion that gold represents about 1.55% of the world’s portfolios, down from about 5% historically.

 

That's only one reason to buy, though. We have also seen emerging middle classes around the world purchase gold as a way of passing on wealth or showing wealth, as is the case in the upcoming Indian wedding season. We see wealthier central banks buying gold in order to keep a store of assets that can't be debased by governments.

 

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Now we are also seeing a stunning decline in the ability to find more gold as one gold miner after another falters in its attempts to extract gold from the earth with any ease or precision, despite the meteoric rise of the precious metal.

 

You would think these big gains would bring about scads of old gold mines reopening and all sorts of new prospecting, but it just hasn't happened. And outfits such as Agnico-Eagle Mines (AEM) and Goldcorp (GG), once considered among the best in the mining business, have faltered badly.

 

But nothing is more powerful when it comes to raising the price of gold than a Federal Reserve chief, about to speak in Jackson Hole, who can't possibly offer any reassurance of anything but a weak dollar. Whether he does QE3 or pledges just to stay easy, gold can go higher.

 

Now, I tend not to like parabolic moves, one where anything goes straight up, as gold has. But I also feel that people still do not own enough gold. I think that it can go higher, but when the exchanges boost margin requirements -- and I said when, not if, because the recent hike failed to deter buyers -- you are going to get a hiccup.

Rather than tell you to sell gold if you already have it, what I would prefer is that those who own less than 10% gold as part of their portfolio allocations boost it, through the SPDR Gold Shares (GLD), to above 10%. Those who now have it as more than 20% of their assets, because of price appreciation, should be trimming, but only down to 20%. It is too precious to be anything but overweighted as the ultimate currency for a time when currencies are losing their strength around the globe.

 

At the time of publication, Cramer had no positions in stocks mentioned.

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites.

 

Follow Cramer's trades on Action Alerts Plus.

29Comments
Aug 23, 2011 1:51PM
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Says he has liked it for years? Really? Why didn't he say anything when it was 1000, 1200, 1400?  This guy and Kudlow are the two biggest cheerleaders on TV. They can both eat poo !!!
Aug 23, 2011 1:25PM
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whatever cramer says, do the opposite

 

Aug 23, 2011 12:08PM
Aug 23, 2011 4:29PM
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Why didn't Mr. Big Mouth tell us to BUY when gold was at 800??
Buying high on the bubble is always a sure way to loose your money .

Aug 23, 2011 12:07PM
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Jimmy I bought( auy )a few weeks ago now I have to sell   ,  the next green and I'm gone ,thanks for all you don't do or know. Jimmy you need a new gig. 

Aug 23, 2011 4:11PM
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Is this guy intentionally putting out bad calls?   Is he trying to suck the little people in at the top so that his buddies in the big brokerage houses can cash out?  
Aug 23, 2011 3:08PM
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dumbo is the greatest at yelling about what has already happened(ie he loves gold at 1900)

 

here are some tips.........he called himself dr. unh at one time.......unh went DOWN

he recommended his hedge fund buddy lampert at shld.......shld went DOWN

he touted nyx as his stock of the year at 90 and nyx went DOWN(to 25)

he said scale in to nyx at 60 and it went DOWN

he picked aa as his best performer of the dow this year....time is running out and it is way DOWN

 

THE KEY IS WHEN HE REALLY COMMITS TO A PICK THAT IS WHEN YOU SHORT HARD

Aug 23, 2011 6:42PM
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Typical front running BS from this moron.  Buy High and get wiped out is his motto.  With his track record, shouldn't he try to fade away quietly?  Has he no shame?  I try not to wish ill on any human being, but this guy would tempt Mother Teresa to punch him in the face. 
Aug 23, 2011 5:07PM
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This dude claims to "have liked gold for years and years". Really? Was he telling people to buy 10 years ago after gold plummeted from 900 to less than 300? How much did he like it then? Now he brags up gold when its 1900! This is probably a good sign to sell. The last thing you want if you are a gold junkie is Cramer jumping on the bandwagon.

Aug 23, 2011 1:58PM
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and the strongest currency is gold.

*Gold is not a currency*

 

Sheesh cramer. I thought you went to school.

 

Take a look at a long chart of gold in the era of capitalism (1700s on). You will find that gold basically stores value over time and that is it. Adjusted for inflation, it's an object that retains it's value. That is all.

 

In certain times, it has spiked, only to collapse. In the last century, it spiked 3 times. In the depression, in the 70s when there was stagflation and the financial system was moving away from the gold standard, and today. All three were a function of *emotion* and nothing else.

 

Now, today, I will agree, for the time being, gold is a good bet. And for what could be sometime to come. But if there's a massive bull market globally say 5 or 10 years from now, the prices of gold will retreat.

 

We have also seen emerging middle classes around the world purchase gold as a way of passing on wealth or showing wealth,

No cCamer. There are no emerging middle classes in the terms you are remembering from the 1940s-1960s American middle class. There's emerging debtors. And there's emerging wealth classes. The top 10-20% of the emerging economies are the only people benefiting in terms of "wealth"

 

The average Chinese family for instance, according to the GINI (equality measurement for healthcare, wealth, housing, etc) is worse off today than they were 30 years ago before China began its massive run.

We see wealthier central banks buying gold in order to keep a store of assets that can't be debased by governments.

Wrong Again. Almost every central bank is selling just as much as it is buying. Including China, India, Russia, etc.

 

The only thing in your post that makes sense is to not over indulge in your portfolio. If you get above 20% by valuation, to trim back.

Aug 23, 2011 5:36PM
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To BigJoe268.  Being stupid has little to do with being a Jew, you racist bubblehead.  You're a living example of that. 

 

Cramer's no worse than 99% of the other "money experts" making money from their "shows" and "newsletters" and "commentary".  Hell.  If they were as much the expert as they want us to think,  they'd be sitting with the likes of Buffet et. al rather than at that dinky, phony television set desk.   

 

Almost ALL of them write their little commentaries based on TODAYS news and try to sound as if "they told you so".

 

Pfah.  Do your own research and let the talking heads blow hot air for the neophytes.

 

 

Aug 23, 2011 1:44PM
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No matter what anyone says about Cramer, he does have the power to move the markets somewhat. As he is an entertainer first and an investment guru well behind that, all he cares about is that people are responding to him. Good or bad doesn't matter, as all those people buy his sponsors' products, and it is all about the money, nothing else, so never forget that.
Aug 23, 2011 5:34PM
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He says in your portfolio well if GOLD is in your portfolio it is not in your hand it is still in paper..when the paper money falls you think one is going to easily convert it into real gold in your hand?..it is still paper until you have it in your hand it is not real gold!..

 

Trust me when the paper money falls the banks funds that say they have "your gold" they are not going to give it to you, those banks are going to pay you in worthless paper money good luck with that people, Cramer has been worthless on what he says, he works for these companies and you can take that to the bank!..look at his track record on you tube.

Aug 23, 2011 3:07PM
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They say gold is based upon the bigger fool theory.  Is this how bigger fools are birthed?  Look at the chart.  Gold has nowhere to go but down in the long term.
Aug 23, 2011 7:58PM
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Where was Kramer when gold was under five hundred dollars an ounce?   The only advice I see from this guy is to buy high and sell low.  Thanks, but no thanks Kramer.
Aug 23, 2011 4:07PM
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The silver bubble has already popped at 50 after going parabolic. Gold has now gone parabolic and this bubble will end. The key to success is  simply  to modify your portfolio.  I have gone from 10% gold down to 5%. Also, hint! ZSL moves more with gold than dzz.. If you see a 1% move in gold, ZSL can move as much as 10%. Why? Because silver and gold are correlated from a regression model point of you. As Gold moves so does silver. I don't recommend buying DZZ or ZSL.  They both are below their 100 and 200 day moving averages.

Of course, the fact that gold is in a bubble, doesn't mean it can't go higher. It has one major hurdle, though. Platinum acts a lid on gold! 

It is a stretch for me to conceive that gold is a currency or a store of value. All precious metals are correlated. That means platinum, silver, gold, palladium, and rhodium are also currencies using Cramer's logic. 
Aug 23, 2011 2:46PM
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Gold may not be a currency in Western Countries but in many others it is considered a medium of exchange. We must ask ourselves why do the World's Central Banks continue to buy and hoard the yellow metal.

Remember when the dollar was "as good as gold" and the official price was $36.00 to the ounce? Gold backed currencies limit a Goverments ability to print paper money!! I remember when a ceratin French President started to repatriate paper dollars for the gold in Fort Knox only to have President Nixon close the gold window. 

Aug 23, 2011 5:05PM
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I think what Jim Cramer is trying to say is: You should own solid true wealth because the US dollar and paper currency is heading towards collapse since Obama's Democratic party keeps printing out "funny money" to pay for his annual Trillion dollar spending sprees...
Aug 23, 2011 2:41PM
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Jimmy, don't buy tech, buy Gold  ?   not according to qqq or gld ,   your ego overrates your bald head, a day late and a dollar short    ,        cramerica is going to need Q6   poop head   , they understand nothing ,nothing     rant and rave jimmy 
Aug 23, 2011 1:03PM
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@mirloz

 your right( mirloz,) but my problem has always been holding to long., I'm from Dudleyville AZ ,so I'am just a little flee, jumpimg from one stinky dog to the next, if I can pocket a few grand , from my experance it's time to go ,  and I am thinking( mgm )of (jrcc) they have been stomped for a while . Dudleyvile university say's watch all, like a crow ,  but what do I know....  go people go  ,   do your homework on jimmy he can make you a buck but more than likley not,.,., Hausta.

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