The Silvertowne Vault Cast is brought to you by Silvertowne.com
It’s Monday and welcome back to the SilverTowne Vault Cast. I am your host Shawn Ozbun.
First I want to apologize for this show coming a date late. I totally forgot about Monday being a holiday and I didn’t mentioned on Thursday’s show, that I would be recording today instead of yesterday.
Today I have some awesome information lined up for you. I came across a great interview that really nailed down how gold works, and how it actually helps you hedge against inflation. We are going to be spending the whole show on this information. I’m very excited to go over it all with you and I think you will find that this is the best information that I have shared on this show. This is an episode that you will want to really pay attention too.
As always there will be links on the SilverTowne website and on the YouTube channel so that you can go review this interview for yourself, and read the parts that I didn’t include.
Before I get into all of that, let’s have a look at today’s precious metals pricing.
Gold – $1394.17 Up $ 7.37
Silver – $22.63 Up $.24
Platinum- $1447.00 Down $3.00
Palladium- $733.00 Down $7.00
Gold will rise against USD; it may hit a ‘new high by 2013-end’
Nick Barisheff is the founder, President and CEO of Bullion Management Group Inc (BMG) and the author of $10,000 Gold: Why Gold’ s Inevitable Rise Is the Investor’s Safe Haven.Widely recognized as an international bullion expert, Barisheff speaks to Vivek Kaul in a free-wheeling interview on the future of gold and why the current fall in its price is going to go away soon. As he puts it: “I would not be surprised to see gold hit new highs before year end.
What do you think are the reasons behind the recent fall in the price of gold? How soon do you expect it to start going up again?
In contrast to the lows in paper gold, unprecedented buying of physical gold was triggered. If this were truly a natural correction or the indication that the gold bull had turned into a bear, then the physical market would be panic selling, not panic buying. Over the long term, these artificial declines in the price of paper gold are good for gold as it lets a lot of big players enter the markets. I do not expect this “correction” to extend over a long period of time as it is artificial. However, it is possible this was coordinated to correspond with gold’s slow summer season. I would not be surprised to see gold hit new highs before yearend.
One of the major myths about gold is that it is not a good inflation hedge. You suggest that its a great inflation hedge. Can you explain?
The best way to see how gold works to maintain purchasing power, and therefore a good hedge against inflation, is to think in terms of ounces rather than the more relative dollars or euros. As I mention in the book, it took 66 ounces of gold to buy a compact car in 1971. Today it would take about 10 ounces. We can see the same ratio with houses and even the Dow. Today you can buy three average size houses for the same amount of gold you would have needed to buy one house in 1971 even though the prices of houses have risen significantly in dollar terms since then. That’s how gold serves as a hedge against inflation and maintains its purchasing power
Gold bugs have been suggesting holding gold because they expect very high inflation due to excess printing of money. But there’s no big inflation yet…
Real inflation has set in, but it’s hidden through doctored government inflation reports. Anyone who eats, heats their home, drives a car or sends their children to college knows this, but governments need to hide this fact because, for each official point in inflation they would have to pay out hundreds of billions in indexed pensions. As well, the method they are currently using to keep the bond market strong is through low or negative real interest rates. I have discussed in several recent articles the methods governments use to secretly rob pensioners and savers through these low interest rates using a program called “financial repression”.
So where will all this money printing that is happening ultimately lead us to?
All world fiat currencies eventually end in hyperinflation followed by complete collapse. Throughout all of history there has not been a single example that did not follow this pattern. The US dollar will fail for the same reasons the others failed, because politicians cannot resist the urge to print unlimited amounts of unbacked currency. This eventually appears as inflation brought about through currency debasement. The main reason this positively affects the gold price is because gold is not rising in value, currencies are losing purchasing power against gold. Therefore, gold can rise in price as high as currencies can fall. As Voltaire said, “Paper money eventually returns to its intrinsic value—zero.”
Anything else that you would like to tell our readers regarding this?
We can also add that over the past 3,000 years the most effective solution to runaway inflation brought about through currency creation is the re-establishment of some type of relationship between currencies and gold. It doesn’t need to be a 1:1 relationship, but whatever percentage it is, it will cause gold to trade much higher. We are in uncharted territory here. Several reputable analysts are calling for $10,000 gold for this reason, such as Société Générale’s Edward Alberts and the man Barrons labelled “Mr Gold” because of his proven understanding of the gold market – Jim Sinclair, who stated he expected gold to eventually trade at $50,000 an ounce. Again, it is easier to understand why currency debasement will result in rising gold prices when we realize gold is not rising in value, but currencies are losing value against gold.
Gold has always been seen as an anti-dollar. To what extent do you think the US will go to protect the dollar and discredit gold?
The US government is highly motivated to maintain its reserve currency status and to maintain pricing of oil in US dollars. The US is the world’s largest debtor nation and the only reason it has been able to run up such a large debt is because it had the world’s reserve currency, thanks at first to the Bretton Woods agreement in 1944. When they broke the peg with gold in 1971, the dollar’s status came under scrutiny, but there were no other currencies challenging it at the time. In 1973 the Americans secured their position as the world’s reserve currency when Opec agreed to denominate oil in US dollars alone. This is now being challenged as China has entered into trade agreements with Japan, Australia, Brazil, Korea, and numerous others to bypass the US dollar and settle trade with each other’s currencies. This is a direct threat to the US dollar’s reserve status. Read More...
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[Disclaimer] Shawn Ozbun is not a licensed financial adviser, there is risk associated with all investment including gold and silver. You should seek advise from a licensed financial expert before making a purchase.
