Why Gordon Pape recommends you buy gold

Respected author and investment guru Gordon Pape  is no "gold bugî but, he says, now is the time to buy gold. That's because Pape, a keynote speaker at the upcoming Distinguished Advisor Conference, believes the U.S. Federal Reserve's third "quantitative easingî (QE) is bad news for investors.

"It suggests the economy is in worse shape than we thought,î says Pape, the author of more than 20 books as well as the editor and publisher of the Internet Wealth Builder. "The Fed says QE3 is about job creation but it is more involved than that. The economic numbers are telling them something ó and the numbers are worse than they thought.î

In mid-September, in the midst of a hard-fought U.S. presidential election campaign, the Fed announced its plan to purchase agency mortgage-backed securities at the rate of US$40 billion a month for an indefinite period of time. As well, the Fed decided to keep the target range for the federal funds rate at 0% to 0.25%, at least through mid-2015, an extension of its earlier deadline of mid-2013.

"The fact the Fed decided it had to act now,î says Pape, "suggests the situation is deteriorating at a rate that would make further delay a dangerous gamble.î

There are other reasons QE3 causes Pape concern. First off, it is inflationary. Commodities are priced in U.S dollars which means it will take more US$ to buy a barrel of oil, an ounce of gold, a pound of copper or a bushel of wheat. He admits that good news for Canada's resources sector ó but bad news for consumers.

"Gold is the prime beneficiary,î Pape says. "If you don't own gold, you should. It's a good insurance policy.î

The Feds open-ended commitment to print money will also devalue the US$ and put upward pressure on the Canadian dollar, making it difficult for Canadian exporters, who are already feeling the impact of sluggish trading partners.

Finally, the Fed move ties the hands of Bank of Canada Governor Mark Carney, who has repeatedly indicated that he thinks the time to raise interest rates is drawing near. But if Canadian rates move too much out of step with U.S. rates, it will be one more factor pushing the C$ higher. "Carney is hamstrung,î says Pape.

That makes the theme of this year's Distinguished Advisor Conference ó "Navigation: Charting a New Courseî ó particularly apropos. Pape will address the annual conference, held this year in Naples, Fla., from Nov. 11 to 14, on Monday, Nov. 12; he'll talk about how advisors can develop profitable investment strategies for their clients in what is essentially a stagnant economy.

Early registration deadline for the conference is Sept. 30.