Let's talk gold and silver

[Jeremy]

As some of you know my latest investments have been in precious metals. I'd love to hear others thoughts on precious metals versus other investments right now. I do own gold, but my favorite thing to buy lately is silver.

The way I see it, the dollar is toast long term. I have yet to see anyone on the internet, or in the world give a legitimate argument on how the U.S. dollar can survive in 5,10, or 20 years given the current U.S. debt, projected deficits, and spending. As a disclosure, I am not a Republican or Democrat. I think they have both failed my country. This has absolutely nothing to do with politics.

I realize the "stock market" (DJIA) is at record highs right now. However if you think it's the actual free market that has risen stocks to this level, well.......you're an idiot. The DJIA has risen because over a trillion dollars was injected into the market via bailouts, and now institutional investors who make the market have a shit load more cash to play with. <----- Please tell me I'm wrong. I am begging someone to dispute this. How many of your neighbors are "playing the market" and investing long term in companies because of their fundamentals?

The answer is none. Nobody I know has any confidence in the stock market and the way it is ran. The stock market in the U.S. has become a giant casino for big companies like Goldman Sachs, Chase, and a bunch more to simply gamble every day. But why not, Bernanke is staking them, and the Fed is the house taking the juice and funding it, (aka taxes) from the United States taxpayers. To Big To Fail, that's free money now when you know that the government (we the people & taxpayers) will just give it it to you when you go broke. Plus the Federal Reserve loves it because then they can print more money and charge "we the people" more interest on it.

Seriously, the taxpayers are really on the hook for 300K+ each for every man, woman, and child in the United States of America. If you think this is sustainable, again, you're an idiot.

The market will collapse. It's not a matter of if, it's just when. So this is why I have began accumulating as much physical silver as I can. If a worse case scenario never happens, I'll probably be about even on my money if I need to liquidate.

But heaven forbid, if the dollar ever did literally collapse, I will be sitting here feeling just fine with a safe full of precious metals.

Thoughts....

[scrawnybob]

the trouble is if things globally (and its not just the US its the "developed world") get so bad that you physically need to have your investments under the bed / tangable silver / gold etc ...

then all is pretty much lost - and your better off investing in a shit large woodland in the middle of nowhere with a nice tent or shed and 3 tonnes of baked beans as all hell will break loose in centers of population very quickly IMHO (and I'm not one of those survialist people either) its just that our civilisation works when it works and pretty rapidly wont work at all if only a few things start to go wrong

however if your looking for tangable investments that are trying to keep value or gain value relatively and assuming the economic world will still spin round in somekind of fashion ... then I would simply go on looking for

actual quantifiable rarity combined with a relative low current value in the market

I think silver is still relatively undervalued but afiaks gold certainly isnt and has possibly rallied past or very near its max value
so I reckon personally your making the right call wiht silver over gold ... maybe there are other metals that are relatively undervalued but vital and precious none the less ... I cant help feeling that with gold ads wall to wall on TV that is a "market" that is about to run its course (just like buy-to-let and property overboiled from people turning away from stocks for pension etc)

whereas other quantifiable "rare" unrepeatable things that currently are undervalued may include wine, stamps (thats definately worth a look), art even (think unpopular old masters type stuff or at least dead people), maybe land in the middle of no-where for other panicing people to buy etc

bear in mind if the economy really really goes down the pan - things that will be genuinely valuable are the things that have an intrinsic value in that world - clean water, petrol, basic non perishable food, guns and seeds etc

silver / gold / stamps / wine / stocks etc actually have zero real value - the same as currency

so I guess I'm suggesting if you dont think the world will totally fall in the a bit of lateral thought might get you in at the bottom of a market ... because yours still working on the idea of markets working to some degree

just a thought
cheers SB

[PokerDude]

Precious metals (specifically, Gold) is a great hedge against a collapsing dollar and rampant inflation. I believe that everyone should incorporate precious metals into one's portfolio.

Here's my problem with Precious metals currently. IMO, the stock market is overblown, and given all the badness still out there, it is ripe for a correction. Similarly with Precious metals - their run up has been rampant, and consistent with the falling dollar. I think that we'll see a 20 % "short-term" correction in both the dollar and stock market over the next few months, and will also see a short-term correction in precious metals. I believe that will be a real good time to jump on-board with precious metals once again. In other words, buy on the "dip".

Long-term, I agree with the OP, in that unless our debt is reduced and/or curtailed (not likely given the increased spending and reduced tax revenues), the dollar will continue to plunge, and precious metals will continue to climb. Also, if inflation spikes severely at any time in the future, due to the rampant govt spending, I think both precious metals and the stock market will benefit.

[jdwanchalk]

There will be pullbacks, that much is inevitable.

Would major countries be purchasing massive amounts of Gold to replace their US paper currency if they had faith in it? No, of course not. Now, do you think the average investor has more insight into the worldwide economic affairs then those who make investment decisions for the world's leading powers? Again the answer is no.

People reacted to inaccurate job loss numbers on Friday. The dollar went up so metals of course reacted and lost ~5% (Gold). There is no way in the world that the dollar will sustain a recovery.

The only argument I have heard for getting out of Gold now is that it is going to drop back a ton, so that then leads to the question of what are you in this for? If you are buying for short term gains there is better choices than metals. If you are holding for longer term gains I don't see a much better choice. Sure, commodities and food items are good to buy, but metals are/will be the currency of the future. You can't trade food for food unless you are bartering, there needs to be a currency to simplify the process (metals).


I wouldn't be surprised if Gold goes to $1050 or so, I wouldn't be *too* surprised if it went to $900, but I would be surprised if it went any lower. No matter how low it goes I am sure it will recover to numbers far north of $1,200.


The best argument for not buying Gold (aside from it being at its peak) is that it has no intrinsic value, but the simple fact is that next to nothing has intrinsic value in that sense.

[Jeremy]

Personally I am not buying metals as a get rich quick, or even over 20 year scheme. More so for the reasons Pokerdude mentioned; to hedge against inflation and the falling dollar. In fact if all my gold/silver even maintains it's value or only loses a few points, I'll be happy and comfortable with the investment.

@Bob, you're right, if things did hit the fan, what will be valuable is food, water, guns, and bullets. I do have all of the above, but also have the resources to stockpile these inside a day if need be, unlike precious metals where I find it easier to accumulate over time.

Afterall, if we experienced a Zimbabwe, Weimar, or Argentina type collapse of our currency; all of the sudden having silver/gold to barter with or buy necessities becomes a lot more realistic. Do I think this will happen or is imminent? Probably not, but why not be prepared since I have the resources and capital to do it now.

I just think it's funny that the majority of Americans are blind to history and what has historically happened in other countries and even the U.S. Almost everyone I know has the attitude that "It's America, that could never happen here"

My guess is many people had this same mentality in 1930 after the stock market crashed, and then saw record highs. We are in an eerily similar position now. The only difference is that back then the U.S. was not drowning in foreign debt.

The dipshits in Washington are projecting over $1 Trillion in deficits each year for the next 10+ years. It's almost like a planned collapse/default. Are countries like China and Japan really going to keep financing this debt for the next decade when our country really doesn't manufacture or produce anything? Probably not. Then what?

I'm sure some people may read this and think I am gloom/doom or being too negative. Instead however I think I am just being realistic to the fact of what is transpiring right before our eyes.

If you lived on the coast and knew that there was going to be a hurricane, you would most certainly board up your windows. Why not take the same protection in respect to your finances, well being, and family given the financial hurricane the U.S. is going to see in the next few years.

[addz123]

I did a university economics essay on the gold standard recently. Many current economists argue that we should go back to the gold standard monetary system where all currency exchanged is backed by clear parities of gold (as opposed to the fiat money system we have). (Interestingly the entire gold standard system came about by pure accident - cock up by Sir Isaac newton who was in chanrge of the mint).

Problem with gold though, is that the independant value alone is subjective, and has been volatile to gold 'rushes' and dicsoveries of natural gold deposits.

Another point is that the type of scenario you point to - the collapse of the stock market - is not something you can really avoid... you have an entire economy built upon it.

[TheGooner]

Gold has been considered a store of wealth for over 2,000 years - ever since the first coins were minted from gold, silver and electrum. So as well as their prize value for jewelry and manufacture they also had an easily exchangeable and tradable value backed by nation states.

The problem with Gold as a store of wealth today is that this is no longer true, and so the price of precious metals fluctuate wildly as they are subject to speculation.

The actual physical metals market is tiny compared to stocks and shares, and theoretically any mainstream market movement into precious metals would blow the price sky-high ... except that mainstream markets tend to move into ETFs and paper versions of gold rather than the physical bullion itself.

Silver at least has the backing of being used in many industrial processes, but despite that is still lagging at around $19/20 per OZ, and now at 1/50th the price of gold (traditionally ay 1/20th ratio) and this fact just underlines how "precious" metals are not ALWAYS an accurate store these days.

Finally, much of the reason why gold has jumped from a price of US$850 to US$1200 per oz in the last five months has been the fact that it is quoted in $US which as had been pointed out is devaluing quickly.

During the same period my local currency the $NZ has moved from $0.50 up to US $0.70. So for me there has been little appreciation in gold price.
eg.

June Gold = US $850 / 0.50 = NZ$1700 per OZ
Dec Gold = US$1200 / 0.70 = NZ$1714 per OZ

I think that you'll find this is true for many trading currencies, such as the CAD, AUD, NZD, GBP, EUR, ZAR and even the Indian rupee ... although siginificantly as the Chinese Remimbi is pegged to the US dollar the Chinese have seen growth in gold price - possibly hence their buying trend?.

For us - with our local banks still offering 5 percent per year - money was better in the bank.

SUMMARY :
I don't believe that prevcious metal bullion is a particularly reliable store of wealth these days, it will never be valueless agreed, but it's backing is emotional rather than a realistic trading vechicle and it has all the hallmarks of another bubble.

If you have a ten oz bar of gold then take it out and look at it. That is supposedly $12K value, and the same bar was $8.5K just four months ago. What has it done to increase it's value? Nothing.
What use will it be when money is valueless? None.
(Try negotiating a "chunk" to obtain anything in a post-money world)

And as been said - if you really think that all the financial systems will fail - then buy land, food, guns and ammo, solar generators and anything else that you think you need to be self-sufficient.

Baring complete failure - if you are based in the US, then I would have thought that actually purchasing and holding a basket of international trading currencies in foreign currency accounts - where they can also attract interest - would be a more logical investment.

[jdwanchalk]

What has it done to increase it's value? Nothing.
What use will it be when money is valueless? None.

This is the "no intrinsic value" argument I referenced earlier. Gold and Silver have and probably always will be a means of currency. It is a scarce resource that is not replaceable.

You could say the same about stocks. A lot of them do nothing other than waver to public opinion. What value would a stock have when money is valueless? None.

[TheGooner]

This is the "no intrinsic value" argument I referenced earlier. Gold and Silver have and probably always will be a means of currency. It is a scarce resource that is not replaceable.

Gold and silver are no longer currency !

For the first time in over 2000 years (actually since 1973 in US I think) no nation state backs gold or silver to a specific value. It's a significant impact on currencies (which now only survive based on estimates of sovereign ability to pay back) but it also impacts on the actual value of gold silver too.

There are many more relevant scarce resources in our industrial age, oil, uranium, platinum etc, etc, etc.

Gold and silver's pull is historic, but in the last 100 years the situation and circumstances have changed - it's no longer used as a backer of currency. And that's why Gold can spend 10 years (after it's crash in the early 80's) sitting a $200 to $300 per oz as well.

[jdwanchalk]

Gold and silver are no longer currency !

For the first time in over 2000 years (actually since 1973 in US I think) no nation state backs gold or silver to a specific value. It's a significant impact on currencies (which now only survive based on estimates of sovereign ability to pay back) but it also impacts on the actual value of gold silver too.

There are many more relevant scarce resources in our industrial age, oil, uranium, platinum etc, etc, etc.

Gold and silver's pull is historic, but in the last 100 years the situation and circumstances have changed - it's no longer used as a backer of currency. And that's why Gold can spend 10 years (after it's crash in the early 80's) sitting a $200 to $300 per oz as well.

Ok, but you can't deny it is the most liquid item you could possibly own. I guess I meant to say it could certainly once again become currency, and is traded as such to this day by some people in some areas. Sure, you can't go to McDonald's and buy four meals for an ounce of Silver, but I hope/think that it will one day turn to that. Our paper currency operates under a false pretense of scarcity whereas Gold and Silver are actually scarce.