Skip to comments.The Truth About Buying Gold And Silver
Posted on 04/12/2014 10:48:13 PM PDT by Petro
Friday, April 11, 2014
The Truth About Buying Gold And Silver Every day, the radio airways and cable news broadcasts are filled with advertising from "gold bug" companies who are trying to convince you to buy both gold and silver. There are dozens of them: Goldline, Lear Capital, Rosland, Merit, and so on. All of whom claim that, by holding these precious metals, you are being protected against inflation as a result of massive government spending and the devaluation of the dollar, or, protected against another recession, depression, or stock market crash.
The problem is that all of those claims are bogus. The proof of that is in the chart below, which shows the combined price of gold and silver which has been adjusted for inflation in today's dollars: Click on Chart to Zoom As you can see, these two metals have a history of spiking in price, but once that price hits some "tipping point", there is a long and painful slide downwards. This happened in 1980 when gold hit a high of $850 an ounce or nearly $2,000 when adjusted backwards in today's dollars. By 2001, just before the next spike upwards, gold hit a 20-year low at $250 (unadjusted); or about $325 (adjusted). During that 20-year slide, holders were paid no dividends; probably weren't savvy enough to hedge against their losses; and, most likely got stuck with relatively high storage and insurance costs to protect their investment. Worse, if you did buy gold in 1980 at its high, you are still underwater (see graph) when adjusted for inflation. Just the opposite of what buying gold was supposed to do.
What none of the gold bugs are willing to tell you is that, in 2011, gold and silver both hit respective nominal (unadjusted) highs of $1,904 and $49.50 an ounce. Today, gold is trading around $1,300 or down $600 from 2011. Silver is even worse off with today's price near $20; and, that's a loss of more than 60% since its 2011 high. All indications are that these prices will continue to slide; just as they had done in the 20-year period after the 1980 spike.
I guess what really bothers me about the gold bug ads is that they make all kinds of unproven claims and predictions. For example, Lear Capital is running a current ad that features Eric Sprott; a billionaire Canadian hedge fund manager. In that ad, Lear offers any callers a report by Sprott that predicts that gold will exceed $2000 an ounce sometime this year and that silver will be at least $50 an ounce by the end of the year. Well, that's the same claim Sprott has made every year since 2011. In fact, in 2011 he predicted $2155 (Canadian) for gold and $64 for silver before the beginning of 2012. While close in 2011, none of Sprott's predictions since, have been anywhere near being true. My guess is Sprott is holding a lot of gold at a loss, and by hyping its price potential he can cover those losses and find an escape hatch. While Sprott's claims seem outrageous, there are a bunch of people predicting that gold will hit $5000. Just Google it and you won't believe how many, and for how long they've been making that prediction.
Lastly, these metals have big liquidity problems. There's a lot of dealers out there who will sell you this stuff. Try selling it back to them; especially when the prices are falling. Try finding buyers on your own. In either case, you will have the cost of shipping to the buyer, and the additional cost of hefty shipping insurance.
Chart Perspective Gold: 100 Year Historical Prices: http://www.gcasset.com/chart-perspective-gold-100-year-historical-prices/
What Happened to the Gold Price in 1980?: http://buying-gold.goldprice.org/2008/01/what-happened-to-gold-price-in-1980.html
Sprott On Gold In 2012: http://katchum.blogspot.com/2012/05/eric-sprott-on-cnbc.html
Sprott On Gold In 2011: http://www.jaggards.com.au/news/medusa/article_75.asp
Posted by George B at 6:54 AM Labels: gold, gold bug, Goldline, investment, Lear, Merit, prices, Rosland, silver
I buy gold for no other reasons than
1. “if” there is hyperinflation
2. “if” there is a collapse of society and money is no good.
either one may not happen, and if it does the gold may still not save me, but, I don’t use the rent money to buy, and on paper I haven’t taken a loss.
If society collapses, it won’t be gold or silver that has value - it will be food, water, guns and ammo that will be the new money.
I never hear these naysayers opine that you were a fool to have bought silver when it was $3.00 or gold when it was $290.00, but if you search the publications during that time, I'm sure you could have found an equal number of naysayers writing that only fools would buy at these inflated prices. Warren Buffett bought a bunch of silver at $5.00 and was so hounded by the pundits that he sold at $7.00 a few years later.
Beware the all knowing pundits.
I suspect at that point, as you say, lead (with a powder charge behind it) will be more valuable than gold.
~~~it will be food, water, guns and ammo that will be the new money.~~~
Of course this is much later on:
King James Version (KJV)
19 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.
My stashed and cached in various places, physically held, (no paper), P. Metals will not be used for barter or trade, (After some years of preparing up here, I’m as well prepped as I’m gonna get with the major essentials and tangibles), or anything else. My PM’s will be used only as a conversion to, a trade in for, a swap out to, an exchange for, or what have you, to the new ‘currency’ put in place after the collapse. I might be playin’ it wrong, who knows what is gonna happen for sure, but that is the plan I have been staging for. One thing is set in stone: I will never run or flee America because things are getting tough. I was born here and I’m goin’ out here.
Bizarre and intentionally misleading dollar-bug article.
Go down to your local shopping area/mall and count up all the “We BUY Gold” signs.
Then try to find one that says “We SELL Gold”.
For a while. When things settle down after a period of transition, and people return to producing surplus goods, some form of wealth transfer (currency/coin) will be needed. Gold and silver have been such throughout much of human history, and alternatives (tobacco, for instance) were used when the metals/coinage was in short supply.
The only times when gold and silver were not worth much were when there were extreme shortages of necessities, and even then most black markets would have a deal somewhere, albeit the gold or silver was worth relatively little.
What’s actually going to happen is that the Federal Reserve Note - that many people continue to call the ‘Dollar’ - is going to continue hemorrhaging buying power. Shadowstats estimate it at about 6 to 8% a year.
Since Nixon closed the Gold window the whole world has been using Fiat currencies: mere pieces of paper backed by Government force and increasingly unrealistic Government promises. Their buying power is bleeding away - just like the FRN.
Buy precious metals. Also: add to your stock of food, stores, tools, ammo. Make all the usual FReeper preparations.
But do not stay in paper money and paper promises.
Buy it just under $300 an ounce, sell it at just over $1,200 an ounce, kick yourself a bit for not waiting till it went to $1,800 an ounce but still smile. That’s what you should have known about buying gold.
As in, he buddy I'll trade you an ounce of gold for that can of beans. How about two ounces then?
Now how the heck do they know that?
The ads are so annoying. People have no jobs, no money and these annoying actors and their sponsors what peole to buy gold and silver.
What people want are jobs, money to pay bills, food on the table, affordable medical insurance not mind numbingly stupid commercials telling them to invest in gold and silver by some phony actor.
Unless events push society back to a literal stone age - a hunter-gatherer existence with no farming - then money will be valuable.
Why is money important? Because it allows for the "concidence of wants" without which trade is impossible.
Join me in a thought experiment.
Imagine that the dollar has finally collapsed and that we live in a Mad Max dystopian nightmare.
In the center of this brave new world you run a chicken farm (appropriately defended by traps, barbed wire and kick-ass FReepers with sniper rifles).
This month you have costs - you need to hire a guy to mend the generator and a midwife to help with your daughter's pregnancy. How are you going to pay them?
They have what you want - but do you have what they want?
Unless you have some money there is no "coincidence of wants".
The generator guy and the midwife have no use for a hundred chickens! They need to replace their working materials (bearings, WD 40, medical supplies, etc) and upkeep their cars by trading with people who live a hundred miles away.
But if you have money then you can trade with them.
Carrying on with the example of a chicken farm - it's market day. There are a hundred customers lined up at the gates of your compound who want to buy what you've got - but do they have what you want?
Fifty of them have wheelbarrows of devalued fiat currency and bad attitudes. You don't want their bundles of useless scrip.
Forty of them will offer some form of barter: alcohol, batteries, hunks of homemade cheese, their young, nubile bodies, etc.
You are faced with the time and expense of evaluating forty different barter offers, many of which you will have absolutely no use for.
And ten customers offer you money: Gold and Silver. These are your favorite customers: their real money fulfills the requirement for a coincidence of wants. You can take what they offer you, and use it to buy the services of the midwife, the engineer, etc.
In summary: trade relies on the coincidence of wants, which itself relies on money.
At the moment we can still use fiat currencies for trade, because fiat currency still (sort of) works like money. But we won't be doing that when we've passed into Zimbabwe or Wiemar republic mode.
Hope this was helpful.
Gold will only shine as a future investment if inflation starts to soar. Even then its price could be suppressed by soaring interest rates.
The dollar is immune from normal investment logic because it is the reserve currency of the world and Washington can get away with runaway spending forever it seems. Maybe not forever, but cash has been king for a long time.
I would buy only a small amount of gold or silver as insurance against a unlikely runaway inflation scenario. Your cash flow is more important. As the saying goes:” Sometimes the market can remain irrational much longer than you can remain solvent.
I like collecting gold and silver coins for numismatic purposes, especially fractional gold coins, as even if they lose value as collector items, they can still be used for barter with someone who may not have change for 1-oz of gold.
When the US confiscated the public’s gold, they did not confiscate collectible coins.
I used to give out stamped, silver bullion bars as Christmas presents to my employees, merely because they looked cool, they were tangible, they were heavy, they were valuable, they were investments that the employees might retain and great conversation pieces that most people didn’t/don’t go out and buy for themselves.
Are gold and silver the end all of asset protection? No. Just as .45 ACP is not the end-all of self-defense. You need a 12-gauge shotgun (with an assortment of bird shot, 00 and maybe even rifled slugs) and a nice long range rifle (I like a 308.)
I think having some gold and silver is as wise as having a bug-out bag and grub stashed away in safe-boxes in safe locations.
You don’t need enough gold and silver to fund a new country... just a little in case others got bit by the gold-bug and trade with it when nothing else is trading.
Crack and Xanax - start stocking up
I bought most of my gold at $295/tr oz and most of my silver at $15-$25/tr oz. I’m holding it as a SHTF hedge. It still seems like a good idea.
People w/o gold and silver like to say that. Actually one needs a variety of resources to be secure. Gold, silver, lead, good, a source of potable water and basic medical supplies are core.
Want to stock trade items? Half-pints of vodka and brandy and tampax, will be very tradable; probably at the same time of the month.
The US Dollar will eventually become the American Dollar or Americas Dollar. This would be made possible by the Democrats ushering in Immigration (Read NAFTA) for Canada-US-Mexico; eventually from North to South America. The current debasing of the US Dollar is almost complete, time for an Economic Union and Trade Zone second only to the EU.
It has been suggested that silver may be the only antibiotic effective against flesh eating bacteria.
Also that it enhances all other antibiotics.
Nonsense. 5000 years of human history says otherwise.
“...One thing is set in stone: I will never run or flee America because things are getting tough. I was born here and Im goin out here....”
Same here. Pretty much says it all, brother.
Born an American.... Live an American... will die an American... HERE.
...... I will never run
Ditto that Brother
Brass, lead and copper with a lil silver and gold thrown in for the good of things.
Now if only I could find some 22WMR things would be good at the hacienda....
That stuff is scarce at the moment for sure...
I couldn’t care less about gold and agree with the opinion here in general with respect to the wisdom of parking in gold but isn’t the fake money propping up the market these six years holding gold and silver down?
Something is better than nothing - when laying in prep supplies on a limited budget, I also thought it wise to have some US silver dollars - not enough to hurt if the value drops severely, though.
Advertising claims about gold, even on talk shows, are phoney and fraudulent.
Gold is good only if there is hyperinflation, or the entire money system collapses. Then you are competing with everyone else who has gold to try to trade it for bread and milk.
Better to stockpile thousands of toothbrushes and toothpaste tubes, to trade for bread and milk, if there’s a collapse.
In a total collapse scenario there will be barter of all kinds. The currency may be food, gold or even sex.
I have to laugh at the one ad that promises to send you a free “one gram bar of pure silver, to show how sincere we are”.
Your conclusions are not simplistic enough... People will not be gauranteed that the money accepted will be accepted by those with things they want ... No one will know what others will accept when the shtf. Accepting payments of 100 chickens may be done in script form. Perhaps, and that will depend on the integrity of the dealers. Just like fiat currency, bartering will be a game of trust.
Building relationships and communities will be key... Families will be essential and they will police their own... Ma fia will be huge.
It’s a ‘thus sayeth the Lord’ for those days. That is near the end of the Great Tribulation, though.
I have a serious question about “prepping” and perhaps this thread is a good place to ask it and get some seriously good answers.
Let’s say you are moderately well prepared for what some are saying is inevitable. You are debt-free, outright own a nice spread of acreage and a house in the mountains, with 5 flowing freshwater springs and can grow food and live off the grid if necessary. The community surrounding you is like-minded and ready to pool resources and talents to all survive.
Now, here is the question that is keeping me awake and my blood pressure too high..... What do you do when the dysfunctional government comes to collect the property taxes each year? And don’t just tell me that property taxes are levied only by counties. When the income tax dries up, the feds (and the UN) will come after the only thing we still own.... the land. And our entire community lining up with our guns to hold them off will not stop them from flying over and dropping bombs.
Is it just me, or do we “preppers” seriously need Divine Intervention as our number-one asset? Because it seems like that is what it will all boil down to.
You may be cashin’ in to a chip in the hand. If that is the case I would “just say no”.
For such a time as this . . . http://www.patburt.com/
This is a good link. http://www.raptureready.com/rapnews_db.php
How about buy 400 oz silver at an average purchase price of $7.18 per and still got it? Let’s see, should I keep it or sell it? Keep it or sell it? I think I will keep it.
I our area now even the “We buy gold” places are closing there doors and going out of business.
Gold and silver are supposed to be long term stores of value. They are NOT supposed to be money, in the most common sense.
If the dollar collapses, they will/should be exchangeable for whatever new currency shows up next.
The biggest caution should be if there is a deflationary crisis. The gold would drop in value like a rock.
I was young(er), and my wife worked in a bank...one day she comes home and says the rumor around the bank is that, they are going to unpeg gold...what do you think that means, to which I replied, doesn't mean too much I guess....gold was $32/oz
The government, as it is, would not survive to that point. Without the money from the US, the UN could not function. Without the US driving the world economy, no other force could project itself to the North American continent.
There are a lot of “fears” that do not stand up to critical analysis or common sense.
Rather than buying gold, buy ammo. Its value will increase exponentially at the time gold is supposed to be saving your ass.
Me too and by the grace of G_D I find myself in the South.
The gold advertisers are just trolling for rubes. Just remember that there are plenty of dealers who sell cheaper than the ones that advertise on radio.
As for an investment, diversification is usually your friend. Stocks are waaaaay overpriced in my view. PM’s, not so much.
In a serious collapse, no government at any level will be working. People who “did” work for government, will be home trying to keep their family alive.
If there were any lawmen working, they would be trying to put down chaos, not coming to get you off your land or drop bombs to destroy you and the land. They aren't going to take on another battle on top of trying to stop the killing going on everywhere.
Also, there are too many people in a county in every state in the union, for any govn. law agency to try to remove everyone from their land.
Take the situation in Nevada that just happened with the rancher. The federal agency who took the rancher's cattle and wanted the rancher off the land, backed off because there were more patriots with weapons than there were agency armed men. That is a lesson for all to learn - there are more of us than them. Those patriots had weapons with them. If they hadn't had weapons, the federal agency would have NOT backed off. That is why we have the second amendment - the right to bear arms against a tyrannical government.
These pinheads that author these opinion pieces leave out important facts. Fact is they claimed gold would never exceed $1,000 ounce. It did. They claimed there is enough gold for every order: There isn’t. They claimed silver would never exceed $15 ounce: It did, and quickly. They claimed gold and silver would fall by 2007 after a meteoric rise in 2006: They didn’t. Then they claimed gold and silver would fall within the year 2008: They still haven’t.
Doesn’t seem any prediction by these hot air blowhards has come true.
To heck with gold and silver. I just received an email that’s gonna make me rich:
I am Mr.Babel Atwood of South African Reserve Bank, Cape-Town Branch in South Africa. I will be happy to work this deal out with you if you have a corporate or personal Bank Account and if you are capable to keep this deal TOP SECRET.
I need strong assurance that you will never let me down, if I transfer this money to your account. Tell me more about yourself, while I look forward to hearing from you, I want to assure you that this business is risk free and you can send an empty account to receive the funds, provided that the account is capable to receive incoming funds.
Thank you for your time and attention.
If someone is buying precious metals for speculation, then they should be knowledgeable and have both eyes wide open. If you are an investor, best of luck and I hope you exceed your expectations!!
As for me, any time I try a gamble or investment, I tend to lose far more often than not. The most important piece of advice I’ve heard — and that I follow religiously — is to only risk money that you are completely willing to lose.
With that firmly in mind, I still do buy gold & silver in small quantities on a regular basis. Not as an investment in the usual sense of the word, but merely to stash away as an “if all else fails” nest egg that the govt can’t so easily get it’s hands on. I do believe that it will always hold *some* value (small or large) even in a post SHTF society, mainly because it’s easier to carry gold & silver coins than a cow, goat or bushels of peas.
So I’ll stop once I have as much as I can easily carry in an ammo can or thereabouts. I sincerely hope I never actually need to use it, but perhaps my following generations might put it to good use. Or maybe they will waste it. Who knows? But by then, I’ll most likely be long gone and in a far better place!
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