San Diego, California

Flying alone provides me with the time to reflect on events, the markets and issues that command my inner most thoughts. There’s something special about being alone at 38,000 feet, something peaceful.

On this trip home back from Currency Expo in San Diego, I’m thinking about the scores of people who attended this great event. More than 400 investors listened to me speak on Saturday morning.

I was truly impressed by the deep understanding of money delegates treasured; I spoke to more than two dozen people after my presentation and there’s no doubting that these delegates “get it.”

So what does “get it” mean exactly?

It means understanding the relationship between fiat paper currency, inflation and gold. For those “who get it,” the long-term decline of the American dollar has resulted in a serious loss of purchasing power vis-à-vis other currencies and inflation.

Since 1950, the real purchasing power of the dollar has lost more than 90% of its value due to the destructive forces of inflation. The hardest currency in the world and backed by gold again, the Swiss franc, traded at 4.30 CHF to the dollar in January 1971; today the Swissie commands at 13% premium against the sad dollar.

Amazingly, many smart people I know, including super-wealthy businessmen, don’t subscribe to the bull market in gold after a more than fourfold increase in the bullion price. These highly successful individuals don’t believe in gold and don’t even want to be convinced why they should buy an asset that pays nothing and just sits in storage. It’s amazing but even the super-wealthy don’t understand the relationship between the dollar or paper money and gold and other hard assets. It’s like they’re almost oblivious to the whole thing.

And that’s why I’m still bullish on gold. There’s no questioning whether gold is cheap at $1,500 an ounce; it’s not. But I suspect that by the time this great bull market is over everyone – including the ones that “don’t get it” — will be forced into the market and will chase gold north of $2,000 or $3,000 an ounce. That period will coincide with the next currency crisis or sovereign debt crisis – a very big secular event that will push the non-believers into gold.

The global exchange rate system is a very sick and distorted mechanism. Gold continues to act as an alternative currency outside the confines of the bulging credit and debt universe and that’s a trend that won’t end any time soon.

With gold down this month, I’d use much lower prices to buy some distressed miners like Barrick Gold (Toronto-ABX), the world’s largest gold mining company, now approaching a 52-week low in Toronto. Also, Kinross Gold (Toronto-K) has been trashed and sits near a five-year low despite releasing strong earnings two weeks ago.