Money Talk Daily

Posts Tagged ‘gold’

Seems to be one heck of a battle going on at $36.00 in the silver market. Some very large players seriously don’t want it to move above that level. Nothing new of course – we’ve seen that battle fought over and over. When $36.00 is taken out solidly, watch to see where those on the short side set up their defenses next.

Sometimes a little history can straighten out some big errors.  Like this whopper…

“You know, if we do have an economic meltdown, I’d sure rather have my money as cash in my hand rather than in something like gold or silver coins.  What happens if nobody wants that gold or silver?  And what can you buy with it?”

This one is easy to fix.

• Do a search and see how long gold has been valued and used as money.  (Hint:  Answer will be around 6,000 years.)
• Now do a bit of research on the history of paper currencies to find out how many have retained their purchasing power permanently, let alone in crises. (Hint:  None.  They all have become “museum pieces.”)
• Conclusion? It is far more likely that your gold or silver coins will retain their value than your paper currency.

Now it might well be that using a one ounce gold coin in trade could be a problem because it’s worth over $1,000 and you are trying to buy a cheeseburger. But that problem is easily solved by using fractional gold or silver coins. Or you could sell your gold or silver coins for whatever paper currency is currently in use and spend that money.

Anyway, we are not talking about convenience here but rather the ability of paper money to retain value as compared to precious metals, particularly if there is an economic crisis. The likelihood that you are going to wind up with a sack of worthless gold or silver coins is vanishingly remote. But what about your paper currency?

Study history.

This is historic. For the first time ever, gold has put in a weekly close in excess of $1,000.00 per ounce.

I recall my old finance professor at Washington University in St. Louis telling our group of eager business majors to watch the gold price because it is always telling your something. He also said that typically governments would prefer everyone ignore the price of gold. That was back in 1977. So what is gold telling us now?

Now there’s a question that stirs up all sorts of debate. At the risk of getting into the middle of it, I will offer as my opinion that the price of gold is telling us the following:

• Vital parts of the economy – especially the banking industry and various derivative instruments – are not fixed.

• Price inflation is a real possibility at some not too distant point.

• Foreign governments that are large holders of U. S. financial assets (as in China, among others) are displeased with the way the U. S. Government is managing its financial affairs and may be considering unilateral economic actions. (Note that China recently admonished its citizens to start stocking up on gold. Why do you think that is?)

• There is a general nervousness about the solvency of financial institutions.

• People are learning to read charts and have noticed the general direction of gold bullion prices over the past several years.

• There is a sense that geopolitics remain very unstable.
Now what you do with this information, if anything, is entirely your business. And, anyway, those are just my opinions and observations.

The only thing I might suggest is that you heed the words of my old finance prof, and just keep an eye on the royal metal and try to hear what it’s telling you.

Craig Bennett