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Precious metals (PM’s) got hit hard this past week, as did oil, copper and many other commodities. I still recommend buying gold & silver but the bottom for gold & silver may not be in yet so there’s no rush to buy large quantities as they may still get cheaper in the short run. There are a multitude of conspiracy theories explaining what happened. None of them really matter. What’s important is that gold, silver and other precious metals are on sale. This is a terrific opportunity to accumulate gold and silver at bargain prices.
One thing is certain; there’s a well-orchestrated campaign to tarnish precious metals (no pun intended). Chris Martenson says, “the past week has all the earmarks of a high-gloss propaganda campaign complete with well-placed anti-gold stories in the media and the careful use of language aimed at sowing doubt about gold’s ability to be a store of wealth.
“But for those who consider gold a store of value, the recent gold slam is a gift: an invitation to purchase more sound money with fewer units of paper currency. In other words, a sweet deal.”
So, do not panic and do NOT sell your gold & silver. Instead, be prepared to accumulate more.
Don’t believe the anti-gold propaganda. As one of Jim Sinclair’s readers said,
“Has the Western world stopped printing money? No.
Has Japan stopped printing money? No.
Has China stopped buying gold? No.
Has the world economy started to boom? No.
Has Europe solved all their problems? No.”
The Global Europe Anticipation Bulletin (GEAB) provides a level-headed European perspective. ”… the [U.S.] dollar is the ultimate bubble. All the United States’ supremacy rests on dollar domination, and the whole objective of their foreign policy is to preserve this domination at all costs. However, they don’t have this option anymore. The dollar role is fading away on all sides, with sudden swap agreements or ex-dollar foreign trade; abrupt loss of confidence, in the United States included, where the Fed’s inflationary policy has led several States to authorize gold as a currency or at least to consider it; China’s progressive dumping of US treasury bonds (would be this only be because it’s amazing trade surpluses have disappeared), etc. The Bitcoin bubble again illustrates this distrust in the dollar…”
The chart below shows the recent damage to the price of gold. The triangle in the price of gold (red lines) was breached to the downside and gold went into free-fall.
There are a number of precious metals beside gold and silver such as platinum and palladium. For the rest of this article, consider ALL precious metals when I use the word ‘gold’.
As I’ve explained paper currency is becoming more worthless with each passing day because it is losing its purchasing power. Gold is real money that does not lose its purchasing power over long periods of time. Other than short-term volatility, gold buys the same things today as it did hundreds or even thousands of years ago. You can insure your wealth against the ravages of inflation by converting paper money into PM’s. Even Jim Cramer recommends gold coins.
Not to put too fine a point on it but you do NOT invest in PM’s. PM’s are money, not an investment. Gold and silver are money and, unlike phony paper (currency, derivatives, ETF’s etc.) they NEVER go to zero.
James Turk says, “Because physical gold and silver are tangible assets, they do not have counterparty risk. Their value is not based on any bank or central bank’s promise, but rather, on those individuals who appreciate their 5,000-year history as sound money and usefulness in economic calculation.”
Gold will increase in price in the long term but it will probably do so slowly because it has left a bad taste for now. Eventually gold will go ballistic in a final sell-off and that will be the time to convert gold into other real assets. However, that’s a long way off yet.
Prices will increase over a long period of time with much volatility along the way. Gold may even get close to $1,000 on the downside over the next few weeks at which point many gold mines become uneconomic. The chart below shows the cost of mining gold has increased sharply over the last five years.
It is important to note that gold fell in price largely in the ETF market (Exchange Traded Funds). ETF’s are NOT real. They are a type of Derivative which is a structured financial instrument based on a real asset like gold but they are NOT gold itself. They are paper gold. They are a way to gamble on the price of gold but they do not give the speculators access to actual gold. In fact, there is more paper gold ETF’s than all the real gold in the world which demonstrates several things:
1) How artificial ETF’s really are.
2) How easy it is to distort an asset’s official price by the big money ‘shorting’ an ETF.
3) How easy it is to fool suckers. ETF is paper; not real.
The REAL price of gold has nothing to do with the ETF’s price. The real price is what you pay for gold coins or bullion on the open market when you buy or sell gold at a distributor or coin dealer. This real price of gold is 10%, 20% or as much as 30% higher than the “official” price set by ETF’s although this varies from dealer to dealer. This shows you how artificial the “official” (ETF) price is. The real price is what you pay for the real thing.
Also, be aware that demand for gold (all PM’s) is so great right now that there’s a waiting period between three to five weeks or more. Most dealers have been cleaned out and are waiting for re-supply. 41 year market veteran Bill Haynes says buyers are outpacing sellers 50 to 1.
You may be able to use a credit card for a down payment (refundable deposit) but expect to pay the full amount with either a money order or certified check. Again, this depends on the dealer and if you’ve dealt with them before.
Do NOT attempt to buy gold from a bank. Banks do NOT carry precious metals because PM’s are their enemy. They deal only in funny munny (fiat or paper currency). Banks hate gold because gold’s price increase over the last twelve years proves that money is becoming more worthless.
If you don’t already have a PM dealer, do your own due diligence when buying PM’s. Make sure the dealer is accredited with the Better Business Bureau (BBB). Ask around. You may know people who have experience with PM dealers. I’ve been dealing with Gatewest Coin in Winnipeg, Manitoba, Canada for more than ten years but there are many reputable dealers.
And, most important of all; TAKE DELIVERY. Do not leave your gold stored at a dealer or in a bank or Credit Union safety deposit box. If you don’t have it; you don’t have it.
By the way; mid-level safes are getting hard to find, too. That’s a pretty good indication of two things:
1) People are losing confidence in the banking system and keeping cash at home.
2) More people are buying and taking possession of gold & silver.
Another thing to consider; don’t store it all in one place. In a worst case scenario you may be forced to cough up the contents of your safe or hiding place to robbers, thieves and government thugs (that’s redundant, isn’t it?)
Stay tuned. It keeps getting more interesting; just like the ancient Chinese curse: “may you live in interesting times.”
April 20, 2013
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