GOLD AND SILVER!

How High Will They Go?

August 28, 2012

"How high will they go?" A question asked very often of me and my kids. The answer really isn't that difficult. How high will lettuce, suits, tires, glass, lumber, books, cars, guns, coffee, or any other tangible item go in dollars? An ounce of gold, has always bought a good man's suit, and it still will. Suits and other tangible items, have gone up in dollar prices, just as has gold. Gasoline is double what it was four years ago, because of government actions in killing Gulf of Mexico drilling and production, additional taxes, refinery shortages, and similar things, which influence prices more than normal inflation.

Real estate prices have gone down as much as 40%, and 30% in others. In Texas, they haven't changed much, because they never went up with the rest. Real estate is different from other items which are tangible, again because of government. Government forced banks, Freddie and Fannie to loan at low rates to those who couldn't afford it, so with the huge volume, prices went up quickly, and people were 'flipping' them at a profit, till the market got wise. I predicted it in a column four years ago, which was before it peaked and collapsed. The reason real estate boomed and collapsed, is not related to inflation.

Have gold and silver gone up faster or further than other tangibles, and therefore ready for a correction? I have no crystal ball, as to what may happen next week, or next month, but a couple of years from now, I can easily guarantee you that prices of gold and silver will be far higher than any savings account or CD will give, by many percentage points. Are gold and silver excellent investments? Yes. Why? Because they hedge you against inflation, which is un-stoppable, unless history, for the first time, doesn't repeat itself.

Paper money, which is un-backed by gold or silver, has always gone to absolute zero. When George Washington was fighting the Brits 235 years ago, the infant government paid for the war by printing the 'Continental Dollar.' Ever hear the expression, "Not worth a continental?" That refers to the Continental dollar, which became totally worthless, so many of them were printed.

During the War Between the States, the North paid for its side by printing 'greenback dollars,' and the South printed 'Confederate dollars,' both of which became worthless, due to being printed to the point where they became worthless. Stott's Law says, that "The more of anything there is, the less they will be worth," and this includes water in the desert or real estate for sale. This, obviously includes the three paper currencies previously mentioned. Will the buck become the fourth currency here in the U.S. to become worthless? It's already lost 98% of its value, so it doesn't have much further to go now, does it? As a kid, in my Dad's drug store, with a marble soda fountain, Cokes for a nickel, and candy bars were the same price. Same Coke and Hershey bars, only they're smaller. The prices haven't gone up. the dollar has gone down.

As I write this on August 27th, bags of U.S. silver coins are $22,700, which means that a silver U.S. dime is worth $2.27, and a silver U.S. quarter, is worth $5.68, and not from any antique value either, but for their silver content. Give you a clue as to what has happened to the dollar's purchasing power? As a kid, stamps were two cents, and I could go to school on a trolley car or bus for 3 cents. A book of 'school tickets' contained 40, and sold for $1.20.

How high will gold and silver go? The answer is obvious, at least to me, and that is, unless you can stop the presses, balance the budget, and pay the debts, there is no limit. I can look at some of the thousands of client cards I have, and see hundreds of them where people bought Gold Eagles at under $200, 14 years ago, and under $300 11 years ago.

What currency in the world has any value, other than a value a government attempts to place on it? No government would dare to place a value on its currency, so it just says, as the dollar says, "This note is legal tender for all debts, public and private." Doesn't give a value, does it? It can't give a value, because it constantly declines in value. Gold and silver are priced in dollars, or whatever currency is used in any nation around the world, and since they are all going down in value, or purchasing power, due to their constantly increasing amount in circulation, there can be no limit as to how high in any currency, any tangible item, such as gld and silver. can go in a currency. As a teen, I bought gasoline for 19 cents a gallon, and a new tire for $9.95. Same gas at $3.78. Don't you wish you'd saved in gasoline? No, because gas evaporates, explodes, and requires a lot of storage. 60 year old gasoline probably wouldn't burn in an engine now, anyway.

Gold and silver have been actual money for thousands of years, in all nations. If the dollar were backed by gold, we'd have no inflation, and no continual frauds perpetrated by the various Ponzi Scheme artists which surface constantly, which have robbed thousands of foolish investors, of billions of dollars, with no recourse. Why isn't John Corzine in jail? Even though he robbed his clients of hundreds of millions, he is a loyal Democrat, which is probably the reason.

Annuities

If you wouldn't save in dollars, because they're losing value, why would you invest in an annuity? Annuities promise you the same amount of dollars per month, for so long, but it can't guarantee the value of the dollar they give you. Every month, you get the same amount of dollars, and every month, they'll buy less. A ten year old annuity pay out every month, is so small, and buys so little, compared to what it bought ten years ago, that those who bought one ten years ago, are bitterly disappointed, and for good reason. They agreed to take a savings account in dollars, which is what an annuity is. Suppose, ten years ago, the person who invested $100,000 in an annuity, had bought gold? When they needed money, they sold a coin. They would have gotten about 340 Gold Eagles. Ten years later, their coin sales would have been probably less than a couple a year now, to equal the annuity payment, they'd have gold left when their died, which could be willed to their kids. Save in gold and silver, which require no refrigeration, huge storage space, and are easily bought, sold, left to your heirs, and stored.

Gold and silver have a spot price, which antiques, old cars, numismatics, or rare stamps, don't have, The spot price, is what bullion coins and bars are closest to, so their sell and purchase (bid and ask) prices are easily figured. A bullion coin or bar (Credit Suisse bar, Maple Leaf, etc) is by the ounce, not age or condition, which are irrelevant when times get tough; and they're getting tougher daily.

P.S. Go see "2016" in a theatre. Anyone who sees it, couldn't possibly vote for Obama.