In this article, author Gary Christenson provides answers on ten very common questions about investing in precious metals (gold in particular) in 2014. With the gold price 40% off its peak, 2.5 years in a declining pattern on the chart, there are a lot of questions about the true value of gold investing. The answers, though, could be surprisingly simple, at least for those who are willing to see in an unbiased way.
“Gold has been going down since August of 2011. It is clearly in a bear market, so why tell me it will go up?”
Yes, gold has fallen about 40% from its high but why assume that means it will continue falling? It looks to me like a 40% correction in a long term bull market.
“I see nothing but trouble in the financial and political world. I see potential war in the Middle-East, in the Ukraine, in the South China Sea, and maybe elsewhere. I see morons in high places doing silly things. I see bankers printing their currencies to excess, as in uncharted territory excess, and I can’t see how this will end well for anyone, even the upper 1% of the political and financial elite. I want to buy gold and hunker down but I also know that gold prices are manipulated, controlled, and capped, so why should I buy gold?”
I think it is important to remember that the powers-that-be (PTB) have been mismanaging the world for a long time, we are still here, the sun still shines, and gold has retained its value for several millennia. If the manipulation were overwhelmingly powerful, why is gold selling for about $1,300 instead of $300 like it was 12 years ago? The answer is, in my opinion, that the PTB know the dollar is going down and gold is going up, probably a long way up, but the PTB want to manage the dollar’s devaluation, not let the devaluation get out of hand, and they need to keep the game of financial musical chairs playing while they “get theirs.” Buy gold and ignore the daily, weekly, and monthly shenanigans in the markets.
“If gold were in a bull market, it would be going up but gold is clearly going down, so why do you think gold is in a bull market?”
I probably can’t convince you, but these are the facts as I see them.
1) Gold was selling for about $42 in 1971 when the national debt was about $398 Billion, not the $17.5 Trillion ($17,500 Billion) it is now. Gasoline was selling for about $0.36 per gallon and most prices for food, energy, housing, and automobiles were similarly inexpensive compared to today. That looks like a long term bull market in quantity of debt, and a bull market in the prices for food, energy, and gold. It looks like a bear market in the value of the dollar and most other paper currencies. Be happy you don’t have your life savings in Argentinian Pesos.
2) All markets correct. The NASDAQ 100 dropped from about 1,480 in July of 1998 to about 1,060 in three months. However, by early 2000 it had surged to over 4,800. Crude oil prices, T-Bonds, the S&P, and most markets rally, fall, and rally again. Gold will rally and then correct again, and again.
3) Gold in 1980 was in a bubble as was the NASDAQ in 2000. The charts, ratios, and timing for gold currently look like a correction, not the aftermath of a bubble.
4) The Federal Reserve and most central banks are monetizing debt, or as it is often called, “printing money.” Do you think they are doing this because our economies, which are drowning in debt, are healthy? Do you think this won’t result in some nasty inflation? When people realize that central banks and governments are NOT supporting their currencies, they will buy even more gold and hard assets as they see their savings being trashed by the “printing” and the inevitable inflation.
5) Do you think printing many $Trillions to support failing banks and bad derivatives is a signal that “all is well,” or a sign of desperation? Central banker desperation supports gold prices.
“I think silver is a better value than gold. I think gold is going up and silver is going up even more. I’m selling my gold and buying silver. What do you think of that plan?”
I think, as of today, silver will appreciate much more than gold and so you are probably correct. But things change and I like the safety and security of gold also. Balance is good.
Source Gold Silver Worlds