Jan 29 2010 2:25PM

Several subscribers have recently asked me why gold and silver have been in a recent downturn.

Elephino! (A cross between an elephant and a rhino.) I do have some opinions to share with you.

With the startling success of the election of Republican Scott Brown in Massachusetts, the media is becoming very pessimistic about the future of Barrack Obama.

I’m not convinced their pessimism is justified. The usual political judgment would probably agree with them. But I am very dubious.

Barrack Obama is a very stubborn and ideologically dedicated man. He doesn’t care about the usual political factors. He will continue his socialist course – no matter what!

Socialism is attractive because it promises to give people money or the functional equivalent. I think Obama will continue his course, and we will still be faced with a socialist government.

My opinion is not the most common opinion, and a lot of people feel Obama is on the way down. Consequently, we don’t need to worry so much about our future, so the drive to buy gold and silver is diminished.

I believe these two precious metals will turn around dramatically when people wake up and realize Obama will continue his socialist course.

Remember he has three more years in the White House, and he still has control of the regulatory means of power.

This is merely an opportunity to buy gold and silver more cheaply. I am pleased to see the prices come down.

I am not interested in only buying metals when they are going up, I want to buy them as cheaply as possible, and that will require occasional retreats. We are having one now, so count your blessings and buy gold, silver and mining stocks and continue to add to your inflation-hedge investments.

Financial Power Grab

I’ve been nervous for some time about converting precious metals into IRAs and 401Ks. I think I understand my fears a little better now.

The government is considering a power grab, which will first seize part of your IRA and replace it with guaranteed-percentage returning bonds. It will start small, but gradually, like government, will grow and grow.

I have not liked IRAs and 401Ks for precious metals because gold and silver coins are supposed to be your ultimate safety if the dollar crashes and burns and if the dollar is no longer a useful means of exchange and a store of value.

So far that has been my biggest concern, but now I am worried about the government seizing a small part of what you own, and eventually more and more until they have it all.

I don’t mind using an IRA or 401K if your objective is merely investment and you turn the investment into money. Then you can use some of the gold-mining stocks and other investments listed in the À la Carte Investment Menu in The Ruff Times, but your gold and silver coins, which should be the core of your investment safety, should not be in one of these accounts. They are all registered with the federal government, and they would know where your bullion is, and the threat is very real that they will want to take your assets away from you.

They are very hungry for cash. Accept this as a solid piece of advice: do not put your gold, silver and bullion in an IRA or 401K. Keep it separate, preferably at your home and not in a product that is literally registered with the government (IRS).

By Howard Ruff
The Ruff Times

*****

Howard J. Ruff, the legendary author and financial advisor, wrote How to Prosper During the Coming Bad Years in 1978. It is still the biggest-selling financial book in history, with 2.6 million copies in print.

His new book, How to Prosper in the Age of Obamanomics is free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.

Howard is founder and editor of The Ruff Times financial newsletter. This article is from a recent issue of The Ruff Times. The newsletter deals with a broad spectrum of middle-class financial issues. (You can learn about it at www.rufftimes.com). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world.