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
Agreed. PMs were valued by the barbarians during the darkest days of the Dark Ages.
The closest thing to an economic apocalypse in America occurred in the South during CW1. Paper money was worthless, PMs were not.
I use CCI minimags. They work in every .22 I own (and I’ve got quite few).
I do not have a reccomendation for any particular model of for the 22WMR. I run mine thru a Savage bolt action with a suppressed barrel using 30gr Vmax ammo. Nice shooter and great for neck shots. The Vmax is some flat shooting stuff.
My everyday shooting has tapered off considerably. Still air my long range stuff out once a week and pistol drills once a week.
Way too many honey dooos but that is okay.
“Honey Doos” keep Mama happy...
cause when Mama ain’t happy, ain’t NOBODY happy...
General rule of thumb!!!
Isn’t that the way!!!? Truer words were never spoken and they will apply long after we are gone! (Not a darn thing wrong with keeping them happy either, they try to keep us happy also......I think.....some of ‘em......sometimes!!)
Thanks for the rec. I have been a Savage fan for a while. They are a very well manufactured product for a fair price. I don’t really need, (Need?....NEED?! Am I listening to myself!? Since when did ‘need’ ever enter into a firearm purchase of mine!!??) a .22WMR with the large assortment of other smaller Cal. rifles in the old inventory but why not another one?! Was the suppressed barrel an add on after purchase or did you receive it new in that configuration?
Dittos to the CCI minimags!!! They are the only .22LR brand I feed my .22LR rifles and handguns and have been for years. I purchased quite a LOT, (both HP and solids), in bulk buys a few years back and am still shooting that ‘pile’ down. I do not think I will live long enough to get thru all of it and that is shooting a bit each week. My rifles and handguns both function and perform great with the CCI’s so why change? Sure there other brands that work fine, I have used ‘em, but those darn CCI’s just ‘keep on tickin’!!
-—Was the suppressed barrel an add on after purchase or did you receive it new in that configuration?-—
Wanted to purchase the new .17WSM that Savage and Winchester developed. Savage finally came out with the fluted bolt action I was waiting for. Super flat out to 300 yards. Only problem, no ammo again.
I refuse to buy a .17HMR. I have seen too many of those that would shoot only a certain grain bullet. If you are going to be in my stable you are going shoot and shoot well what ever I feed you.
Another advantage of holding physical gold is that it disappears from your estate.
Very helpful, thank you.
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