My name is Shawn Ozbun, and our goal is to keep you up to date with what’s going on in the world of Gold and Silver by providing you with current news and precious metals pricing.
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Welcome back to the SilverTowne Vault Cast, today on the show I’m going to cover the biggest lies that you will hear about Gold and Silver. Found a great article from Coinweek, about this topic and I thought It would be great information to share with all of you.
Before we get into all of that, let’s look at today’s precious metals pricing.
Gold - $1382.23 Down $.42
Silver - $21.73 Up $.10
Platinum - $1494.00 Down $4.00
Palladium - $752.00 Down $1.00
Five Big Lies About Gold And Silver
As I have said before, the price of gold represents a report card on the US government, economy, and dollar. If the price of gold is stable, that is probably a positive sign for all three. If, instead, the price of gold is continuously rising, that alerts investors, consumers, and foreign governments that something is seriously amiss in the US.
A rising price of gold eventually leads to the result that people want to get out of dollars and replace them with alternate assets. When this occurs, the value of the dollar declines against other assets. This would result in higher interest costs for debt denominated in US dollars, of which the US government is the largest such debtor. Therefore, the US government has a greater incentive than any other party to put a lid on potentially rising gold prices, as measured in US dollars. Further, since the price of silver generally moves in tandem with gold, that means that the US government also has a motive to suppress the price of that metal as well.
The US government, with the largest budget of any entity in the world, has tremendous political and financial resources that can be used to achieve goals such as holding down gold and silver prices as long as possible. It can arrange to disseminate false financial information, and encourage the mainstream media to mindlessly repeat it. To the shame of the profession, too many journalists take the easy path of simply echoing the misleading data spoon-fed to them by the US government, its trading partners, and allies.
Big Lie #1: “Gold Is Not A Safe Investment.” In his April 11, 2013 column in the New York Times,economic writer Paul Krugman specifically wrote, “historically, gold has been anything but a safe investment.” Out of all of human history, Krugman selected one 20 year period, from 1980 to 2000, as evidence to support his point.
Well, if you are going to talk about history, then let’s do so. Over thousands of years, physical gold and silver have never failed as money. In contrast, of all paper money issued in history thus far, every one has eventually failed, with the average life being only 40 years.
Big Lie #2: The Reason To Own Gold And Silver Is As A Protection Against “Inflation.” Protection against the inflation of the money supply or rising consumer prices has long been a significant purpose for owning precious metals, but there are other factors. Perhaps the most important reason to own gold and silver is to counterbalance the risk of owning paper assets like stocks, bonds, and currencies. In other words, consider gold and silver as insurance from the possible decline of paper asset values.
Big Lie #3: Gold And Silver Prices Are Down More Than 25% From Their 2011 Peaks. This statement is true, but only if precious metals are valued in US dollars. On September 6, 2011, when the US dollar price of gold was $1,870.00 per ounce, the cost in Japanese yen was 145,231 per ounce. As I write this, the price of gold in US dollars is about $1,396.65, down 25.3% from September 6, 2011. However, today’s price for an ounce of gold is 139,861 yen, down just 3.7%. As measured in the Brazil real, the price of gold is down just 3.0% over the same period. As measured by the South Africa rand, gold is actually up 2.8%!
Big Lie #4: Demand Is Down For Physical Gold And Silver. The US government and the media are scrambling to find any statistics that they can to try to make the case that demand for physical precious metals is falling. For example, the Associated Press picked up the World Gold Council’s report that global gold demand in 2012 declined 4% from 2011. There are two major problems with the focus of that report. First, the average price of gold in 2012 was about 6% higher than in 2011, which means that global gold demand in 2012, as measured in US dollars, actually increased about 2%. Second, the World Gold Council reports consistently underreport global gold demand. The tens of millions of ounces of gold being added to the central bank reserves in China and a number of other nations are completely missing from the WGC analyses. Because of this, no accurate analyses of the gold market can be made using WGC data.
Big Lie #5: Gold And Silver Are In “Bubbles.” Typical bubbles involve assets that quickly double in prices, which then fall 50%. That happened to the New York Stock Exchange in 1929, to the NASDAQ in 1999, and to Japanese stocks in 1989. It happened to gold and silver in 1979 to 1980. In that boom, gold tripled in price over seven months, then experienced a 45% drop in the two months after the peak. After silver peaked in January 1980, its price fell 80% over the following two months.
This time around, gold and silver prices have achieved steady annual increases for the past 12 years. Gold is down only about 27% from its very highest price in September 2011. Silver is down almost 55% from its peak two years ago, but it is still many times higher than it was in in 2001. Price movements for neither metal fit into the class description of an asset bubble.
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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.
