The Mortgage Decision, and Gold

by JDH on July 23, 2011

Talk about the dog days of summer. Here in Ontario, as in most of North America, we are enduring the highest temperatures in recent memory. It’s during weeks like this that I’m glad I chose a career that involves working inside in an air conditioned office. In my youth I did outside manual labour (or labor, for my American friends), and I don’t miss it. It’s even hot at 6:00 am when I go for my occasional morning runs. The markets, not surprisingly, are meandering through the dog days of summer as well.

So, as a break, last week I asked a simple question: Mortgage: Pay it off now, or later? My house mortgage is up for renewal at the end of the month, and I wanted your thoughts on whether or not I should use my available cash to pay it off (there’s not a massive amount remaining on it), or whether I should renew the mortgage at current low interest rates and invest the money.

You can read the comments at the end of the post, but the consensus appears to be:

Pay it off.

PaidInGold made the accurate comment that

At the end of the day, the home you live on is ultimately owned by your country. Your gold is yours if it’s in your physical possession with a 45 along with it to protect the investment.

That’s true. You may think you own your home, but if you stop paying your property taxes for a few years you’ll find out who really owns your home: the government. Here in Canada no-one I know has a “45” to protect their investments, but I understand the sentiment: gold is something that is much harder to take from you, so it’s an important part of the picture. I agree, which is why gold is part of the portfolio, but having a place to live is also nice, which is why I assume PaidinGold concluded by saying “If your property is solid, and something to pass down to your kids, paying off the mortgage sounds sound.”

The rest of you, if I may paraphrase, said something along the lines of:

Pay it off! That’s one less debt for you to worry about, and you can sleep easier.

So, since the group has spoken, pay it off it is. I will call the bank this week, and arrange for the payoff. Thank you for your thoughts and comments. Now, back to the markets.


What’s up with gold, and gold mining shares? Obviously, gold itself is up:

For the first time ever gold hit $1,600 (denominated in US dollars), so that’s good news for gold investors. It would appear that $1,600 is a new resistance level, so we may bounce around under that level for a while before we scale the new peaks.

Interestingly, gold stocks don’t show the same “new high” pattern. Here’s G.TO – Goldcorp Inc.:

There’s no evidence of a new high here. In fact, it would appear to be more like a double top, so one could reasonably expect that Goldcorp may drop back to the mid to lower part of it’s current trading range (of $45 to $53).

I am currently 40% in cash, with the hope that I can deploy that cash in August during a shock to the system, in anticipation of the traditionally strong fall and winter period for precious metals.

So, this week I will do covered writes on the stocks that have bounced upward in the last few weeks (like G.TO – Goldcorp Inc.), and then buy back those options if we have a dip.

I’m guessing we are a few weeks away from the real fireworks, so I’ll continue to bide my time, and pay off the mortgage.

Thanks for reading; see you next week.

{ 1 comment… read it below or add one }

PaidInGold July 23, 2011 at 11:17 am

Fair enough.

I’ve stated my points, and at the same time, I’ve got some quiet moments to think to myself about this matter throughout the week after reading other readers’ comments.

I’m hoping that the shock to the system comes before AUG 11 options expire…