Skip to comments.Time To Accumulate Gold And Silver
Posted on 05/01/2012 6:14:42 PM PDT by blam
Time To Accumulate Gold And Silver
By Jeff Clark
Do you own enough gold and silver for what lies ahead?
If 10% of your total investable assets (i.e., excluding equity in your primary residence) arent held in various forms of gold and silver, we at Casey Research think your portfolio is at risk.
After speaking at the Cambridge House conference last month and talking with many attendees, I came away convinced that most investors fall into one of two categories: those who hold an abundance of gold and silver (which tends to be physical forms only), and those with little or none. While both groups need to diversify, Im a little more concerned about the second group. Heres why.
Regardless of what you think will happen over the remainder of this decade, one thing seems virtually certain: the value of paper money will be affected, perhaps dramatically. Even if the economy slipped into deflation, the deflation wouldnt last long. A panicked Fed would print to the max and set off a wild rise in prices. This is why were convinced currency dilution will not only continue but accelerate.
Lets take a look at whats happened so far with the value of our currency vs. gold, after accounting for the loss in purchasing power.
Both the US and Canadian dollar, after adjusting for their respective CPIs, have lost about a quarter of their purchasing power just since 2000. Concurrently, gold has increased dramatically in buying power, far outpacing the effects of inflation.
This is the core reason why Im convinced we should hold our savings in gold and silver instead of dollars.
Mayan prophecies aside, many of our panelists last month, including most of the senior Casey staff, believe economic, monetary, and fiscal pressures could come to a head this year. The massive build-up of global debt, continued reckless deficit spending, and the lack of sound political leadership to reverse either trend point to a potentially ugly tipping point. What happens to our investments if we enter another recession or gulp a depression?
Heres an updated snapshot of the gold price during each recession since 1955.
Clearly, one should not assume that gold will perform poorly during a recession. Even in the crash of 2008, gold still ended the year with a 5% gain. And with the amount of currency dilution weve undergone since that time, it seems more likely gold will rise in any economic contraction than fall. Indeed, if the response of government to a recession is more money printing, precious metals will be a critical asset to have in your possession.
Even if the gold price ends up flat or down this year, the CPI wont. Golds enduring purchasing power is why we hold the metal.
How about gold stocks?
In spite of the debilitating 1970s that suffered from stagflation, price controls, three recessions, and the Vietnam war, gold producers rose over 600% while the S&P was basically flat. And that includes a roughly 65% fire-sale correction, much like we saw in 2008. To be clear, gold and silver stocks wont be immune to selloffs if a recession or worse temporarily clobbers our industry. But in the end, were convinced they will prevail.
Dont lose patience with, or confidence in, your gold holdings. What happens to the price over any short period of time is only one chapter in the book of this bull market, and we think youll be happy by the time that last chapter is written.
He that trusteth in his riches shall fall: but the righteous shall flourish as a branch. Proverbs 11:28
They shall cast their silver in the streets, and their gold shall be removed: their silver and their gold shall not be able to deliver them in the day of the wrath of the LORD: they shall not satisfy their souls, neither fill their bowels: because it is the stumblingblock of their iniquity. Ezekiel 7:19
Why, Dictator Obama will confiscate all of it anyway.
Why not, at 63 I’m already in the metalic age - Silver in my hair, Gold in my teeth, and Lead in my B***. lol
The Fed will do whatever it has to do to make the crash as gradual and smooth as possible. Inflation and currencies in countries that produce real and useful things will rise.
If/when the SHTF the precious metals are not going to be denominated in the US dollar, or Euro’s or any other currency they will be denominated in the price you could get in the third world. These outfits encouraging folks the buy precious metals are just out to take folks money I'd hope conservatives would see through their scam...
so i hang onto dollars instead?
and in the SHTF scenario, what will the 3rd world types give me for my antique american dollars?
answer: nothing but laughs
even if the country doesn’t crater in the next 2 years... just using basic economic outlooks... what, exactly, is this administration doing to strengthen the dollar?
answer: not a thing
the only thing that will make me reconsider holding physical would be... Sarah getting the nomination. that would be a sign that there is a chance the dollar could get stronger. (romney will just grow govt more... which makes the dollar weaker and gold more expensive)
Dollars work short term because at least for now they give you the flexibility to buy other stuff. Land, food, lead are much better/safer investments..
Commodities are going to crash before the SHTF in my opinion.. gold is not worth more than $400 an ounce and silver maybe $8.00.
“Ive been a gold bug since the early 70s. The precious metal are in a bubble, they will crash but I don’t know when.”
When we stop printing money and monetizing our debt. You might have a long wait.
I had an Econ 101 professor tell me the same thing in the early '70's. After class I asked him about this and he cited oil, frozen orange juice, cattle, and a few other commodities as evidence that his statement was correct. My response was that the commodities he cited had a relatively short shelf life. Oil, cattle, and OJ are bought and used shortly after being placed on the market, but precious metals are a stored commodity. The silver teapot made by Paul Revere is still around as are bars of gold mined by the Incas. Oil, drilled by Rockefeller, not so much. Not to discount the many industrial uses of silver, but it is stored in much greater percentages than OJ. The cost of mining precious metals are and throughout history, have not been the determining factor in their prices.
I was just a stupid kid who saved the silver dimes and quarters I came across in the hopes that they would hold their value a little better than the paper dollars in my wallet. I got a B in the Econ course, but in the end my argument is the winning one today.
The problem is that while the precious metals commodities do have a long shelf life the value of the assets people are purchasing them in has a short shelf life. I spend a lot of time in the third world. If/when the SHTF precious metals are not going to be denominated in the currency they were originally bought in but in the cost of a kilo of rice a bushel of wheat or a kilo of soy in a global third world economy. If folks want to gamble the price will stay high for the forseeable future that’s their choice but I have no faith that precious metals buy anyone economic security in the medium to long term
Well, here we are again. Disaster looms on the horizon in the form of economic collapse, and you can bet that TODAY there are many smart, hardworking, and well paid bankers, financiers, and even Central Bank employees working like the devil to ease the coming catastrophe. My guess is that the Big One will in truth be a series of small ones with inflation being the only outward sign that anything was wrong at all. I'm afeared the inflation will be severe and extreme but the underlying structures will be left when the dust settles. If we are reduced to buying bread with gold, then all is lost anyway, but if my ounce of silver can be sold for $250, and the $250 used to buy 10 or 20 loaves of bread, I will say the smart guys were successful. Once again.
Sorry but you must be kidding..set my mind at ease..
We are at war and we are losing. Duh...
We are headed for the all is lost scenario..in that there is no doubt we will be attacked again and again until we win or they win its as simple as that...
Well if that’s the case, then it won’t matter if you have a pile of dollars, bars of gold or lead and brass. But if it works out as I suspect, then I would like to have a little gold and silver. YMMV
“If 10% of your total investable assets (i.e., excluding equity in your primary residence) arent held in various forms of gold and silver, we at Casey Research think your portfolio is at risk.”
Kind of odd.
10% in PM has traditionally been the standard portfolio diversification percentage in NORMAL times. I would have thought, with the US dollar at the edge of an historically unprecedented precipice, the recommended percentage would be considerably higher, particularly from Gold Bug Casey.
We simply cannot pick up our ball and go home we are losing...
you’re thinking of gold wrong
don’t think of it in terms of dollars... as dollars mean nothing when they are literally picked from tress.
the worth of gold is in buying power and time.
for most of the last 2000 years, one gold ounce was the average wage for a worker in the top country in the world for one week. (looking back from roman times, through 1800 to the 20s and today)
basically, one ounce of gold is enough to pay for food and shelter for a four person family for one week.
the average family weekly salary is one ounce of gold
Precious metals are a poor long term investment...
if you say so
i like holding onto my buying power... i’m less concerned about ‘investment’ and more interested in ‘preserving’
in a world where they are devaluing the dollar as fast as they can... gold is one of the few commodities that will hold it’s value. by ‘value’ i mean buying power.
i may not have got 5 times my ‘buying power’ in the last 10 years, but i’ve definitely been able to get 5 times my dollars.
of course, 500% increase in dollars would be a great investment... if the dollar wasn’t also being cratered at the same time.
I’m not smart enough to agree with you or not in the gold argument. But I agree 100% with you that those who want us dead out number us. The only way we could ever win this “war” would be to nuke the crap out of all of them and there’d be no one left but us. Then who will we sell our goods to?