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.
References:
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
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.
“Buy Gold”
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.
Warmest regards,
Babel Atwood
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!
With gasoline at $4 per gallon, that means that one could purchase three and a half gallons of gas for "one dollar" in silver coins.
When I bought my first car in 1964 I remember buying gas for around 25 to 30 cents per gallon. Oh, look, the same silver that would buy gas fifty years ago will buy that same amount of gas today.
If you have to decide whether to hold paper dollars or silver coins, the decision is not that hard to make.
Did the silver change in value? Not so much. Did the dollar change in value? Yes, by a factor of around fourteen.
So true. You buy gold and junk silver for a hedge not necessarily to make a profit.
Wow. Seriously?
God bless the South, brother.
I understand your point and it is very valid but I do not plan to, or ever have planned to, ‘cash’ ALL held Precious Metals in. There will ALWAYS a LOT of Precious Metals ‘held back’ in reserve. In the future system, the new currency used will be accepted readily, as the dollar is now, for standard transactions. I will use the new also by exchanging Precious Metals to acquire that next accepted currency, whatever it might be. We shall see I guess!
I have ZERO .22wmr. I understand it is a very good all around smaller Cal. cartridge. Do you rec. any particular manufacturer’s rifle to buy in that Cal.? I DO have enough of about 7 or 8 other Calibers, (Plus 20g and 12g stuff), to last me a very long time. (I purchased a LOT, and reloading components, about 6 years back when prices were fair and whatever needed was available from Midwayusa or Gunbroker or the 2 local shops ‘down the hill’ I still visit/use.) I shoot just about every other day up here so I still buy, but very seldom/selectively. My reloading set up is still used often but only for Handgun Cals. right now. (Gotta get off my butt and get going on all of that long gun brass again!!) Reloading is a great hobby, and more than just a ‘hobby’ when it comes down to it.
I’ve got nothing in .22WMR in the inventory.
Do, however, like you, have several thousand rounds worth of components needing assembly.
yep, bought it years ago over a period of several years. Bought a little bit along but have not gotten any for a long long time.
Whenever articles like this start appearing, it often happens that conditions will change and make the articles untrue.
I would not buy it at $1200 an ounce where it is now even though I expect it will go to $1400 before long.
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