A magnificent revelation about precious metals.

gecko109

Last night, as I drifted in and out of consciousness while laying in bed, it hit me like a ton of gold bricks!


I happened to be thinking of PM's within the context of bubbles. All the naysayers I encounter on a weekly basis.....you know, the ones that say metals cant go up in value forever.....had really penetrated my very soul. Anyway, like a bolt of lightning, a wave of higher understanding washed over me.

If the USD is on a general downward path constantly.....and almost ALL people, bulls and/or bears at least agree to that premise......then why couldnt a particular commodity....especially an "anti-USD" be on a perpetual path of higher value? Of course, I use the term "value" specifically as denominated in those USDs, and NOT in the real sense of the word which is more accurately described as purchasing power.

Anyway, because gold/silver are globally accepted as the "anti-USD", or actually anti-fiat in general, then there really is no limit to the climb in prices of the metals. It is a very well defined inverse relationship. So unlike the frenzy of tulip bulbs, beanie babies, a certain IPO of a new hot company, or any of the other hundreds of bubble assets....silver and gold are probably immune to true bubble behavior.

Will there be short term fluctuations? Most assuredly....even the value of the USD rises in the short term on occassion. But because the value of metal is denominated in USDs....and USDs continue to grow in exponential fashion.....and PMs are globally accepted as the anti-USD.....there should be no popping of the bubble for gold/silver.

The quick blip in prices in 1980 can be entirely discounted. The fundamentals were not really there to justify $50 silver. The rise in prices of gold/silver happened in days.....the current bull has lasted a decade. Two men are no longer dictating the upswings, the entire world is now. For the past 120 months, the world has spoken....although some still arent listening. They are saying....with their wallets....that fiat is the true "barberous relic".

jmski52

I beg to differ with your revelations to some extent.

The rise in prices happened throughout the whole decade of the '70s. It was NOT an overnight phenomenon that happened in a few days. Gold ownership was legalized shortly after Nixon closed the gold window in 1971. I believe that Kruggerands were legalized sometime around 1972. I clearly remember when I was in college in 1973, looking at the Gold & Silver charts printed in Coin World and wishing that I had the money to buy gold & silver with. The trend was steadfastly in the up direction and Harry Browne's book made it obvious what was happening. In 1978, I had a job that afforded me the chance to load up on silver, and I did. The same trend was intact for most of the decade. It was still intact when I bought some gold futures contracts on margin in 1979, and sold them later that year for an amazing profit.

The 1970's rise in precious metals prices wasn't a brief phenomenon. In fact, here is the similarity with what is happening today - we are aware of the problems but nobody makes a policy decision. Only a few people buy into the metals, because they have pretty much been brainwashed to think that precious metals are kooky investments. The establishment knows that the metals will force them to be more accountable, so they always speak against metals investment.

But - the fact remains that you can't print gold, so gold is the enemy of a bloated government and high-tax politicians. If you can't print and spend fiat, then you have to tax. People won't stand for being taxed to death in this country for the sake of someone's political career, and rightly so. I'd say that we are still in 1976-1977 mode, with everyone jabbering and wringing their hands. The fun begins when my younger brother starts asking me if he should buy some gold instead of a new boat.

There are a few men at JPM and HSBC who *were* controlling precious metals prices. I don't know if they've lost control (yet), but they did a bangup job for years.

There is no reason that the Fed couldn't raise interest rates to 20% and the CFTC jack up margin requirements to 50% on trading accounts while only allowing liquidation sales to take place until the market "calms down". It's already in the Paul Volker "play book". When they did that in 1980, a recession ensued. If they do it this time, a much more serious recession is inevitable, because low interest rates haven't created jobs and government inflation reporting already excludes everything except air.

That's why they aren't raising rates, and that's partly why they are injecting free money into the banking system; (the other reason is so that bankers can give themselves huge bonuses). Both reasons are fact.

The problem is that the structure of the economy is different now and it won't respond to more liquidity, because debt and spending are the problems, aka - Japan, circa 1990-2010. The economy has been hollowed out of manufacturing - service jobs and government jobs don't result in higher production no matter how much liquidity in the form of printed paper coupons you provide.

The fiat problem has also become worldwide, which you alluded to in your dream. This also makes the situation different, since almost every government (with a few exceptions) are doing the same futile things. This makes me thing that most governments will collude to make gold and silver illegal as a transaction medium, in order to force compliance to fiat.

The story isn't over yet, and neither is your dream. Maybe ordinary people will win if they wake up and demand accountability. Maybe the government and banking elites will win. The jury is still out.

edmundfitzgerald

The government will win, as in one world government, with an electronic banking system to weed out fraud and unwanted swindlers of the regime. Everyone's earnings will be deposited into this one world order banking system, and you will not be able to buy or sell without the transaction being monitored by this system. Something tells me the Chinese way of thinking will run this system. Oh yeah, China wants it's citizens to buy gold and silver. I think I'll add to the stack.

CaptHenway

gecko and jmski, there is much truth in what each of you say, though I would not agree 100% with either of you.

For the record, gold ownership (including KR's) became legal on Dec. 31, 1974. Gold had run up close to $200 in anticipation of huge demand from Americans, but it did not materialize. Americans were out of the habit of buying gold. It then drifted downwards close to $100 for a while, and stayed under $200 through 1978.

It took off in 1979 because of the Hunt Brothers attempt to corner the market in silver. I worked with a gentleman who was at Rarcoa in downtown Chicago during the Hunt Bros. era. He said that when they opened the door at 9AM there was a line waiting halfway down the block to SELL SILVER because of the high prices.

He says that many of these people took the proceeds and BOUGHT GOLD with the money they made on the silver. This exchange of silver profits for gold drove the gold bubble. When silver collapsed because the government deliberately burst the Hunt silver bubble, gold fell as well. It bottomed out at $252 in 1999.

The relationship of the dollar to gold is weird. During bad times people want gold, because gold holds its value. During really bad times they want dollars, because dollars are liquid and are always redeemable. All foreign paper money is eventually demonetized. U.S. paper money back to 1861 is still legal tender. People all over the world appreciate that fact.

TD

roadrunner

I sort of agree with all 3 of you. The first leg of last PM bull market actually ran from 1962-1980. When silver coins were pulled in 1965 it was a clear sign that things were wrong. The bull market was already underway.

The spending of the 1950's into early 1960's lead to an inflation problem. The start of major leg 1 of the PM bull began around 1961-1962 with silver. That first minor silver leg ended around 1967. Gold was a tad late to the party due to the manipulative actions of the G7 via the London Gold pool from 1962-1968. Gold peaked on leg 1 around 1969-70. The next major advance was 1971-1974. The 3rd and final advance was from 1977-Jan. 1980. 3 distinct legs upwards over 15-18 yrs, typical bull market action. The first half of the move was generally under stealth conditions. Most people didn't embrace the euphoria until the mid 1979 when it started to go parabolic. Silver had underperformed gold all the way until 1979, when it finally went up 10X in less than a year. Yeah, that was the Hunt's trying to get out from under their paper contracts and buy up all the physical they could.

With or without the Hunts, that first 15-18 yr upleg would have occured much the same way....maybe not to $875/$50, but at levels not too far from that. I think $30 silver would have still been hit without the Hunts. Gold rose to a level that was independent of the silver price as it essentially balanced out our foreign debt at the time. The policies following Bretton Woods in 1944 all but ensured that the 1970's metal rise was going to happen. Paper can't be put ahead of tangibles forever.

Major leg 2 dragged on from 1980-1999 or 1980-2001 depending on one's perception. Basically a double bottom. Long enough to convince 99% of the sheeple that metals were dead and paper was forever to be king. This leg lasted so long because the anti-gold team ramped up operations in 1993 via sovereign gold sales, swaps, and the gold carry trade. While Rubin and Summers talked the "strong dollar" policy from their USTreasury offices as the money supply sharply increased, they ensured that gold would give no warnings. The final nail in the coffin was the UK dumping 400 tons of gold from 1999-2002. For Gordon Brown's wonderful contribution, he was firmly supported for Prime Minister years later.

Major leg 3 is currently in progress. The first thrust was completed in March 2008 at $1033. That was the "stealth" leg that few saw coming until it was way too late. After a massive dip in 2008, the 2nd thrust began. We're probably still in that phase. There might still be a 3rd and final thrust after that one corrects back.

Major legs 4 (down) and 5 (up) are still potentially well into the future and will occur as long as uncontrolled fiat reigns. 21% interest rates and wiping out malinvestments reset the 1962-1980 commodities bull market within 18 yrs. Our current phase seems to have to at least 2015-2018 assuming we take the proper medicine to unrig financial markets. If we don't, the final phase could be extended for many years.

The rise in metals from 1962-1980 was not a fluke caused by the Hunts. Neither was the move from 2001-201X powered just by Warren Buffet accumulating 120 MILL ounces of silver from 1996-2006. A chain of events starting in 1913 all helped to make this happen. But the reasons the Hunts and Buffet acquired silver were pretty obvious. They saw the dollar headed down long term. Warren was bought out of his positon in 2006. The FEDs either had something on him or gave him an offer he couldn't refuse. Either way the FEDs and banksters got the silver in order to back the SLV ETF startup. Better that all that silver be under the bankers control than someone or something else. This is no dream, but a nightmare.

roadrunner