The gold bear market is back in the news...

Editor's note: Due to his travel schedule, Sean Goldsmith will not be writing the S&A Digest today. Instead, Editor in Chief Brian Hunt is stepping into the ring. We hope you enjoy his insights…

The gold bear market is back in the news... What financial pros don't know about gold... Dr. Eifrig's unusual take on precious metals... Take advantage of us!...

 Many assets suffered from yesterday's release of Federal Reserve minutes. But the highest profile "sufferer" is gold...

In its latest release yesterday, the Federal Reserve hinted that it was likely to ease its stimulus efforts to goose the economy. It's seeing enough positive signs that rock bottom interest rates might not be needed for the next several years.

Traders saw the comments as the Fed "taking away the punchbowl." So they sold stocks, oil, and precious metals. Interest rates could rise, which hurts gold. The yellow metal dropped $30 an ounce instantly. It's down even more in overnight trading. As I write, gold is trading for $1,620 per ounce, its lowest low since early January. Just a month ago, it was $1,750. 

 With any short-term gold correction comes talk that the "gold bull" is dead.

Are these folks right?

Our crystal ball here at Stansberry & Associates doesn't work any better than anyone else's... But we've been gold bulls for a decade... We got tens of thousands of our readers into gold early in the game. (I placed one-third of my net worth into gold back in 2003... and hold that stake to this day.) We've even published a book on gold... So we do have some comments that might be of use.

 First, keep in mind that most of the people who are declaring that the gold bull market is dead said the same thing in 2006, 2008, and 2010. Most of these people don't even understand the "idea" of gold.

They don't understand why gold has been used as money for thousands of years. (Gold is consistent the world 'round… It is divisible, it is portable, it doesn't ruse or corrode, it has intrinsic value… And as our friend Doug Casey reminds us, gold is money that governments cannot debase.)

So... although we always like to hear both sides of a debate, we know most people – even highly respected investment pros – just don't know what they are talking about when it comes to gold. Talking with these people is as useful as talking to a goat (though more frustrating).

Gold isn't an investment the way most folks see it. A hundred shares of Coca-Cola is an investment. An income-producing rental property is an investment. Gold is "real money," and thus, is a crisis hedge. We buy gold and hope we never have to use it... just like we do with auto insurance. The sooner people learn that gold is not a conventional "investment," the better off they'll be. If you're late to the party in realizing this, you're not alone. The majority of brokers, financial advisors, and fund managers have no idea this is the case.

 Second, keep in mind the "long view" of gold. Gold has increased in value for 11 consecutive years. No widely traded asset or index has done that for more than 100 years. It's the most extraordinarily consistent price run we've ever seen. Gold is just flat out "due" for a break. It deserves a break.

When I discuss potential short-term trades and write trading commentaries, I often say "Markets are like runners. They can't run flat out without taking a breather." This is a useful view because you learn to anticipate natural corrections. You're not surprised or confused by them at all (unlike most market participants).

This line of thinking is also useful when viewing gold's long-term uptrend. When you know that even the strongest market moves go through corrections, you're not surprised by them. You don't freak out and go on CNBC, pronouncing the gold bull market is dead.

 So... let's take the "long view" of gold.

Below is a 12-year chart of gold. You'll see that since the gold bull market began in 2001, the metal has undergone several corrections. The biggest of these corrections was in 2008, when gold dropped 29% from its yearly high to its yearly low.

You'll also see that this time, gold could fall all the way down to $1,300 per ounce and still remain in the cozy confines of its bull market. 

 With the "gold is not an investment" idea in mind, let's ask, "What if the gold bears are right? What if it's over?"

I believe our own Dr. David Eifrig wrote the best way to view a huge gold and silver correction (or an official end to the bull market) in a DailyWealth piece last year. "Doc" – who recommends gold and silver as crisis hedges – wrote:

 It's my sincere hope that our readers will take this type of "hedged" approach with their investment portfolios.

You don't need to go 100% to gold and silver, buy a handful of assault rifles, and move to an underground shelter in Montana. But you also shouldn't ignore the debt and unfunded obligations the Western world (U.S. and Europe) faces. Consider an "in the middle" hedged approach.

As a voracious reader of newsletters, I can tell you that Doc's "common sense" approach to stocks, gold, and fixed-income securities is uncommon in our industry. Most advisors are either 100% "gloom and doom" or 100% "things are great!"

I believe that's one of the great services Doc provides his Retirement Millionaire readers. With a subscription to his advisory (which costs less than many magazines), you regularly receive professional advice on how to structure your portfolio to handle any crash or boom the market throws at you. You'll learn the right way to build a fortress portfolio of elite, dividend-paying businesses... safe income-producing securities... closed-end funds... and precious metals.

I have to admit... We have a tremendously difficult time convincing readers to purchase this sort of "common sense" research. Constructing a fortress portfolio of stock, bonds, and alternative assets – which incurs few losses – just isn't as sexy as the next big gold stock or miracle-cure drug stock. It's basic human ignorance that causes people to flee from the best ideas.

But trust me... among our serious, educated readers, Retirement Millionaire is becoming a "cult" hit. We're extremely proud to publish it. We're proud that it received one of Porter's highest Report Card ratings out of all of our newsletters... And we're proud of how Doc has compiled one of the greatest track records in newsletter history.

 New 52-week highs (as of 4/3/12): ProShares Ultra Health Care Fund (RXL), W.R. Berkley (WRB), Anheuser-Busch Inbev (BUD), and Constellation Brands (STZ).

 In the mailbag. I guess our readers just don't like relentlessly compounding their wealth with the world's safest, best companies. We received few letters about dividends. So... are you receiving a huge yield based on your purchase price because you bought an elite dividend-payer? Let us know at feedback@stansberryresearch.com.

 "You asked for feedback from those of us who have put WDDGs at the heart of our portfolio, so here's what I have done over the past year. I keep a watch list of my favorite WDDGs (as well as other stocks), waiting for them to fall to what seems to be too good of a price to pass on. I've had better results with this strategy than just buying upon receiving recommendations in your NLs. Here's a sampling of my 12% Letter winners kept in my Roth IRA, all dividends reinvested:

"-INTC purchased March 31, 2011 at $19.97 (up 43%)

"-MSFT purchased June 2, 2011 at $24.27 (up 33%)

"-MDT purchased August 4, 2011 at $33.85 (up 16%)

"-HCSG purchased August 9, 2011 at $12.73 (up 72%)" – Paid-up subscriber B.M.

 "I've taken one of my IRA accounts and turned it into a dividend paying machine over the course of late 2011 and early 2012. I am really happy with the results. In addition, my wife and I have opened up DRIP accounts with several of the World Dominators mentioned in a couple of your publications. Again, VERY happy with the results. I should have been doing this 20 years ago, and the worst part is that I knew the DRIP accounts existed way back then, and knew they could compound returns at a much higher rate than without using the DRIP account. Why I didn't do it then is something I cannot explain.

"Thanks for putting it back into my line of sight. I have been recommending this to my kids as a way to compound savings. At their ages, if they keep earning and putting money away, they could do quite well. I can't thank you enough!" – Paid-up subscriber J.H.

Regards,

Brian Hunt

Delray Beach, Florida

April 4, 2012