Turning away momentarily from the waving flags, the shouts of “USA! USA!,” the breathless media coverage, and the hearty cheers for police, I’d like to ask a freedom question unrelated to the renewed War on Terror. (Time for that later, when the Huzzahs! have quieted down.)
Precious metals.
If you’ve been watching, you know that commodities, especially gold and silver, plummeted Monday and the previous Friday. There were lots of explanations from both bulls and bears, of which this struck me as one of the best.
My question: What’s your take on a) what just happened to the metals, b) what the near future holds for the PMs, and c) what the longer term looks like for gold and silver?
A) The big banks and central banks unloaded a lot of paper gold. B) Do not know. C) Price will go up. Bought some more silver eagles this week to add to my store.
Thanks, Mac. BTW, I should have added something to the blog: One reader reported that when he tried to buy coins at his local dealer, the cupboards were bare. He came home with all his money because there was nothing to buy. And (unsurprisingly), as prices dropped, premiums also soared.
So … anybody else encountering supply problems or astronomical fees when buying gold or silver this week?
“There were lots of explanations from both bulls and bears…”
Hey, don’t look at me!
Oh, OK… Metals commodity trading will fluctuate for a while, but settle down. As the article points out, govs are trying to eliminate gold as a monetary metal, and that’s what the traders look at. Individuals will scarf up metal at the lower prices, but their market forces will be almost unnoticeable against the general trend, price-wise.
A) Couldn’t care less. It just made my average cost lower. When I purchased.
B) It’s not relevant in the future. I don’t generally compare PMs to dollars except for when I buy. After I make a purchase I compare to other finished goods such as a loaf of bread.
C) It will hold its own with the occasional rise and fall against the big Mac index. Against the dollar however I expect it to sky rocket. You just cant write as many checks as the US has done and not expect consequences. The chickens will come home to roost eventually.
D) Yeppers, their is barely any stock. I got my order in almost at the bottom and pickings were slim then. Tried to place another order yesterday and inventory was so low that premiums were uber high.
In the end I only buy PMs because its the easiest way for me to save. I cant readily spend them so they accumulate like ammo and other tangibles with indefinite shelf life. Although during this ammo shortage I found it very easy to unload some boxes at some amazing profit. It may seem crazy to some but all I did was calculate my ROI on tangibles vs paper investments and tangibles won by a large margin. Now I only keep minimal cash investments.
A guest post at The Price of Liberty might give a good perspective. I’ve known this man for many years, and I respect his opinion. http://www.thepriceofliberty.org/?p=1675
But I don’t own any gold. I have no interest in buying it, pretty much at any price. I continue to buy beans and bullets… and in an emergency would not part with either of those for gold.
I know buying and holding gold makes sense to some people. It just never has to me.
Paper gold and silver certificates are worthless and will continue to be so. If you don’t hold it in your hand, you don’t have it. Physical metals will continue to have value, it will fluctuate until the economy crashes the be valued by purchasing power.
For planning, consider learning how to locate and pa for placer gold.
The only precious metal I own are some pre-64 coins I’ve had since forever. I’m in MamaLiberty’s camp on this issue. I don’t see precious metal having any real place in my survival plan.
Maybe I just hang out with the wrong crowd, but ammo, food, machine tools, moderate stocks of steel, brass, aluminum, teflon, nylon, welding wire, and consumable cutting tools seem like better investments for a grizzled old hermit like me. If you want me to do some machine work for you don’t offer me gold as payment. Not interested.
MamaLiberty–You and Warren Buffet.
http://wallstcheatsheet.com/economy/heres-what-warren-buffett-says-about-gold-and-commodities.html/
“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
(Although he’s wrong in saying it was no utility, it is a great conducter.)
a) Prices are set on the margin–and from what I’ve heard, 99% of the existing gold is still in the hands of the same owners (mine still is). The sales were made by panicked speculators and paper gold owners (esp. futures). There was probably some manipulation: Goldman Sachs told their clients a couple of weeks ago to short gold at $1450. How did they know?
b) PM will probably bounce around a bit–and may fall another 15%. If prices drop 10% I’ll be back in the market. If I can find any for sale.
c) Over the past 10 years the moving average gold price has been closely tracking the combined balance sheets of the three biggest central banks–U.S., EU, and Japan. This will continue: the fed is increasing their balances by $1 trillion a year and Japan has sworn to double theirs.
I am not an expert, but precious metals saved my life in a major pinch.
I consider this to be a huge buying opportunity, but I don’t have any money to buy. It may not have hit bottom yet, but that is just a gut feeling.
Those who buy will probably miss the bottom because of availability. Maybe I’ll have some money by then.
I’m part of the Mama Liberty camp: beans and bullets.
I can’t add any specific information other than to reference another article on the subject http://www.doityourselfcapitalism.com/why-gold-crashed
Quite some years ago there was a Sports Illustrated article on Bobby Fisher. It stated, I believe, that he had a Jewish grandfather and that he would rant about Jews and “kites.” He wouldn’t go to a dentist because he believed one’s mind could be controlled by what could be put in the fillings. He also believed, though, that the price of gold was being controlled by one person and he was fascinated and wanted to figure out who that person was.
I don’t know about the fillings, but then it’s a given there are significant technologies about which I’m unaware. And his ethnic rantings certainly were surprising. But if someone with his ability in chess believes he sees a pattern, I have to take that seriously, or at the very least can’t discount it.
I can’t add much, it’s mostly been covered, but I do tell people all the time you either have it in your safe or stay out of it. If you don’t physically have it in your possession it belongs to someone else no matter what you paid for it. Governments are the largest holders of physical gold. That means it’s also the most easily manipulated commodity. They can do it any time they like. And yes, there’s no supply to be had here either. I stupidly figured that since the the price was dropping this might be a great time to get some silver. Silly me.
Forget gold, take Gerald O’Hara’s advice:
Do you mean to tell me, Katie Scarlett O’Hara, that Tara, that land doesn’t mean anything to you? Why, land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts.
Gold has little utility despite what Mises and Rand said. On good land you can grow food, raise children & livestock, build a house, run a business, stand your ground.
Thomas Jefferson summed it up nicely:
(Notes on the State of Virginia) “Those who labour in the earth are the chosen people of God, if ever he had a chosen people, whose breasts he has made his peculiar deposit for substantial and genuine virtue. It is the focus in which he keeps alive that sacred fire, which otherwise might escape from the face of the earth.”
Can’t afford gold, but beans I can grow 🙂
I’ve read a lot of MamaLiberty’s comments over the… months, maybe year…(s)? Cool stuff from that way.
I’m kind of surprised she ain’t buying no gold.
Each to their own I suppose.
Matt, another, umm, do you happen to have any good links for learning how to locate and pa for placer gold?
I’ve always been interested. Minus the typeo of course. …Seriously.
I asked a trapper man (currently doing mechanic work) if he knew anyone who did that. He said he did. He knew of a few old people out West doing that.
I asked how it was for them.
He said it was a hard life, or something like that. …But they’ve been dong it for a long time.
“…But they’ve been dong it for a long time.” Hmm, Must mean it’s working for them. ?
Woody says, “If you want me to do some machine work for you don’t offer me gold as payment. Not interested.”
Ok, so what ARE you interested in, as payment? Chickens? Young women? [As seamstresses. of course!] Also. it must be nice to be independently wealthy. ?
I can imagine a chicken farmer who Only accepts gold coins. … In walks the middle man.
What to do?
If the middle man was like MamaLiberty, she’d have to find someone to trade bullets for gold coins? Ha, what am I thinkin’? She’s got all the chickens and welding she could ever want. “Want of nothing”, says she?
To expand on what Keith Perkins Says:
“What’s the problem with Buffett’s thinking? In a highly industrialized society, a very liquid medium of exchange is necessary …
So when he attacks gold on the grounds it is “only” a medium of exchange, don’t be too impressed. Smart guy that he is, he still, apparently, doesn’t get the need for a medium of exchange for any society beyond that operates at more than a mere subsistence level. ” …
http://www.economicpolicyjournal.com/2013/04/warren-buffett-as-crony-gold-hater.html
A person may plan on operating at a mere subsistence level for a time,… but what happens after that?
Hanza? … Shel? … Anyone?
Old Printer Says, “Gold has little utility despite what Mises and Rand said.”
Uh-huh, how’s that?
It’s portable. It’s divisible. It’s widely recognized. Women love it as jewelry. It has significance in culture. It’s has utility in science and industry. How’s it have little utility? Especially seeing as how it’s had value to humans for thousands of years? Did something change yesterday?
Thomas Jefferson did sum it up nicely: “Those who labour in the earth are the chosen people of God,” … And WHere does gold come from?
And finally, Ellendra says: “Can’t afford gold, but beans I can grow :)”
Ok, that’s cool. Nothing wrong with that.
… So you’re posting this from a library computer or McDonald’s WIFi? Internet connections are so expensive these days. Why, I bet one month’s Internet connection is worth at least a One solid gold ring. YMMV of course.
Add in a cable bill, or a weekend of beer, and we’re talking real money. [Heh, Only one weekend, my fellow beer drinkers.]
I won’t even mention the little bits of necklace I saw in the junk gold pile I sorted through this month that could be had for a buck or two. I bet the larger sections could be had for twenty Dollars, at least! I mean, I knew an aluminum can collecting guy years ago that paid for his truck with the cans he collected along side the road, but… oh, never mind.
Physical gold – not a paper investment – to me, is just another diversifying investment. It’s utility is that post-economic SHTF, it will probably still function as “money”… just like silver will. Because of the volatility in bonds and equities, physical investment – beans, bullets, livestock on the hoof, a whiskey still and PMs – always seem like a really good “Plan B” to me.
I agree with Old Printer on that quote, too. Land also makes sense.
If you’ve been living this “prepared” lifestyle for awhile, your focus shifts away from all the possible worst-case scenarios to “how does society rebuild”? And what I’ve figured, is that people will follow the easiest path: rebuild what you already know. So we’ll have traders, general stores, and even banks… again… after a while. The actual currency and that whole system might change… but the value (not the exchange rate) of gold & silver is going to hold it’s worth in that “brave new world” scenario. One way or another, it’s a plus.
IndividualAudienceMember Asks:
Ok, so what ARE you interested in, as payment? Chickens? Young women? [As seamstresses. of course!] Also. it must be nice to be independently wealthy. ?
I am a long way from being wealthy, independently or otherwise. I am not in business so I never accept cash as payment. There are lots of people who have skills I don’t have who sometimes need a machinist to fix or make something. Payment rarely happens at the time of the transaction. When the time comes that I need something the favor is returned. I am very satisfied with the results.
You seem very unsatisfied with your life. Hope that improves.
I like gold, and silver, and they are a currency of sorts; do they beat bullets and beans? Maybe not initially, but what about later? I started prepping post RVN in 1970, quit in Jan. 2013, why? Because the prep time is over, the game is on. Back to gold and silver, maybe you and five of your buddies will open the first post CW2 bank,who knows. I have discerned two truths in 43 years; 1) it will take a community to survive, and 2) (concerning survivalism) its not about what you can take with you, its about what you can give up.
Woody, of course, was right, about brass, aluminum and teflon, I have welding and machine tools also, but the guy coming thru with stock of such will gladly
trade for gold and silver. Your milage may vary…..
IndividualAudienceMember:
I don’t have anything against gold or those who buy, use, or keep it. If/when the situation lends itself to having gold and silver as money here, I’m sure I’d participate. But that isn’t the case now. It just seems to me to be much more important to invest the limited funds I have in things I can actually use immediately, or trade for things I don’t have and can’t produce.
Yes, commodity and barter items are bulky and sometimes inconvenient to use for trade, but they are always actually USEFUL in and of themselves, especially in an emergency situation. My 100 pounds of salt will always be useful, as well as prime trade goods if people need to preserve meat and hides… I can use the salt to buy some of that meat. Or trade my considerable experience in processing and preserving meat and wild game (or half a dozen other skills) for something else I need and can’t produce.
I think precious metals, jewels, art, and a lot of other things like that are marvelous ways to concentrate wealth, to hold it for whatever reason. But it makes much less sense when people live, more or less, at subsistance level and have no excess physical wealth to speak of. We must provide for ourselves the basics of shelter, food, water and so forth. Anything I spent to obtain gold would take away from making those necessary provisions.
I’d love to be rich enough to buy gold. But that’s probably never going to happen. If, in the meantime, I have my own land, a roof that sheds rain and snow, clothing to keep me warm, water to drink and stay clean with, and something nourishing to put in the pot on the fire… I will be content because those are the riches that mean the most.
I keep a little Junk silver and when I went to buy a little more a couple weeks ago it was “pay now and we will call when it comes in” from a major dealer. I think part of this in the Cyprus bank tax. I have a few beans (can’t grow dried beans here) bullets and also spare saw chains, nails, screws, etc. Its 40 miles to a large hardware store so it’s practical every day prep. Alaska has always been on the end of a long supply line and most catalog sales have freight surcharges. I think tangible Items that can be used or traded are better than cash in the bank and precocious metals have always been a medium of trade. They might not be useful in the middle of SHTF but certainly after.
My take is simple (some would say simplistic). Paper PMs are not for real people. Those are for people who trade paper for paper in order to make more paper. Real PMs, those that you can hold in your hand, are for real people. Look at the difference in pricing and especially availability between the paper PMs and the ones you can actually have shipped to your door. Paper PMS–good availability. Tangible PMs? Not so much, and commanding a significant price premium. As far as I’m concerned, that tells the story.
I’ve always been short on PMs in my overall net wealth; I’m cautiously using the current situation to address that. No, I can’t eat them. But like any other prep, they serve a specific purpose, with that purpose being a hedge in the case of a drastically bad economy without all the Mad Max crap flying around.
IndividualAudienceMember, I didn’t say gold was useless. If you have a lot of money and no place to invest, gold is OK, as long as you remember that it was confiscated by our government in 1933.
As to utility, you can’t eat it, lead is a lot cheaper for bullets, and silver is just as good a conductor.
For most of us, land, tools, and a cache of supplies including medicines and disinfectants makes more sense.
Claire, you may find Peter Schiff’s take on the decline in gold prices interesting:
http://www.gold-eagle.com/editorials_12/schiff041513.html
His belief that as 1st world nations decline and become debtors, government owned gold will necessarily be transferred to creditor nations, is a reach. What’s to stop the good old boy club from forming a world fiat currency completely excluding gold as backing. I think it’s in the works awaiting the big crash. Which may explain why precious metals are being dumped. Is the fix in?
After reading some of the responses it’s almost as if the woman who lived through the collapse in the Soviet Union didn’t know what she was talking about when she wrote recently how gold was of utmost importance during that time. It even seems like FerFal had no clue about what life is like in a collapsed society by recommending gold chain links. Even the thin sheets of gold, used by the people in Vietnam after the war, seems insignificant in a way. …Or not.
I’ve heard many tales from people who were burned by accepting buckets of promises as payment. Not that such are worthless, it’s just that they are not worth their weight in gold, oftentimes, especially in hard times, such promises are a lot like a bucket of salt accidentally mixed with sugar and motor oil.
Old Printer, gold was not entirely confiscated by goberment in 1933. Many people simply ignored the edict while at the same time, the law allowed around five ounces per person. That was a significant amount. And, yes, you can eat gold.
Some more perspective on “why precious metals are being dumped”:
To Central Bankers: You Are Golden Toast On A Silver Spoon
“… the point was that the charts which reflect New York and London exchange traded paper is precisely what the central banking cartel wants everyone to “see” and “believe.” Their attempt to have “paper cover rock” scam is tearing apart.” …
http://www.safehaven.com/article/29568/to-central-bankers-you-are-golden-toast-on-a-silver-spoon
Also, Woody, I’m not sure how you draw the conclusion “You seem very unsatisfied with your life.” from my comment?
Nonetheless, I do find some tings to be unsatisfactory: the direction of the herd. If they don’t turn, we all will be less satisfied.
I’m certainly not satisfied how innocents are jailed or tortured or worse while many remain silent.
It kind of seems to me there are those who claim they are satisfied in life while at the same time they are turning a blind eye to the wrongs of the world and that sort of seems to help the status quo go on. Or, there’s nothing they can do?
To teach and persuade ordinary people is immensely satisfying.
All we need from each other are three things:
>Peaceful coexistence
>free trade
>mutual defense.
Anybody can understand those.
Anyway, thanks for the replies.
“All we need from each other are three things:
>Peaceful coexistence
>free trade
>mutual defense.”
Indeed.
In the meantime, I teach armed self defense, among other things. I’m always happy to receive silver instead of FRNs for my time, just few offer it.
Being content in one’s situation, more or less, is not the same as turning a blind eye to the wrong being done in the world. The difference is in knowing what I can rationally do about it, and what I can’t do anything about.
I think the price drop has come from people dumping gold that they own on paper only. I have heard rumors that the amount of gold on paper far exceeded the amount that was physically out there. It wouldn’t surprise me that the dealers were playing the same fractional game that the banks do. As long as nobody wants to physically take possession of their gold the game works.
I also hear that dealers can’t keep physical inventory in stock.
http://www.zerohedge.com/news/2013-04-20/10-signs-paper-gold-crash-unleashed-unprecedented-demand-physical-gold-and-silver
You’re right Joe… the “paper gold & silver” is what the bankers are dumping… and it’s physical gold & silver… which has gone the way of 22LR and 9mm. You’ll be glad to pay a little more – if you can find it.
————————
Jim said: “Woody, of course, was right, about brass, aluminum and teflon, I have welding and machine tools also, but the guy coming thru with stock of such will gladly trade for gold and silver.”
Those tools might be worth MORE than gold & silver in the long run… as long as there is steel, brass, aluminum, etc.
I have gotten out of financial troubles before because I had gold and silver that were easy to turn into FRNs when I needed them. It made me a believer.
“My 100 pounds of salt will always be useful, as well as prime trade goods if people need to preserve meat and hides
NO! Please keep salt far away from hides!!! 😉
Well, at least furs and deer skin you wanna make into buckskin. It just makes it harder to tan, dress, or otherwise make them into useful soft skins.
IAM, try this link. I have only prospected for gold in AZ. http://mines.az.gov/Rec_Ed/goldpanning.html. Did a lot of it with my Dad and Grandpa when I was a kid. W knew one old retired hard rock miner that had pounds of placer Gold armored around his house. Once he taught us what to look for we were a it more succesfuL. He did not live on the gold he found collected. He lived on a meager salary and jewelry making. The gold was for emergencies, medical bills etc.
I am not against gold, just paper gold. A dab of gold could be handy and wild gold is a neat find. The essence of barter is finding out what the other person needs or wants. Sometimes gold doesn’t do it but a chunk of railroad rail might.
I’ve read the Gold Trail (http://www.usagold.com/goldtrail/archives/another1.html) and remain fairly convinced that the “investor market” is not only completely separate from, but hugely overshadowed by, the “large player commodity cabal”.
The specifics are un-knowable, but middle east players, china, russia, china’s pawns (south africa, iran, korea), china’s peers (australia, france) can be observed to be making large changes in the fabric of the global commodity markets.
I think these observable changes relate to the petrodollar system and the influences of the US Dollar reserve. I think the changes are intended to create a completely independent and competing market… potentially for the purpose of clearing a battlefield for finance war. Alternatively, simply as a backup plan in case of financial disaster.
This alternative to the US Dollar commodity market will not only enable clearing transactions, but will ensure that demand does not drop, and that supply is not interrupted. It hardens the system of natural resource trading against many kinds of instability and outright attack.
Now, as I believe the players in this field to be many times larger than all pooled investment demand, I fail to be convinced of the liquidity grab trope. I happen to think the large and abrupt change in gold price is either a) a shot across the bow meant to move along some other negotiations, or b) a move to free up the gold market for large players trying to dump actual us dollars for actual physical gold on the scale of 100 ton increments.
A lower price does not necessarily hurt the people in this transaction, they could stand to burn a few hundred billion dollars in order to create greater supply, to withdrawal a few hundred extra tons of gold. A lower spot price can bring inventory to market.
So I think first of all, it is obvious that some entity intended for the price to drop, and I think its more likely some entity in South East Asia or the middle east than the fed or some investor group or groupthink.
There are, after all, plenty of people in the world who do place a large mind value on gold. These people almost certainly outnumber the wall street types who see only in green.
I think gold, oil, etc are in a huge tug of war. The lines being drawn put everything in two camps. One, natural resource and true hard asset based, the other being the financialization game.
A clue that china does not see any concern or legitimacy in the financialization game comes from their handling of credit. My impression is that they are playing along with no regard for long term financialization sustainability because they are focused entirely on what happens after that system comes apart.
The initial report of a Saudi National being arrested in Boston, followed by this weekends announcement of a 10 billion dollar weapons sale from Obama to Saudi Arabia… makes you wonder, no?
Gold is everything.
The Provident Metals web site shows everything is delayed, but available. I went to a coin show this weekend and there was plenty of gold bullion for sale. Premiums were normal. I’m not much of a silver guy, but saw some of that too.
RE: Chicken trading. There will always be a ‘currency of the realm’, dollars, euros, hogs feet, tulip bulbs, I don’t care what, SOMETHING will be used for currency. Barter-only has never, and will never exist. Gold will always be exchangeable for the currency of the realm. Nuff said.
“Barter-only has never, and will never exist.”
That’s quite a claim and never is a long time. I wouldn’t care to dispute it, but in my experience almost all “sure things” that could “never” happen, inevitably happen.
Plus, technically speaking, there’s never been anything BUT barter. Denominating the value of two items with a third, doesn’t change the trade nature of what’s going on.
Mostly, precious metals are a means to store unconsumed wealth, which is (the result of) production that hasn’t been used up currently. On the trajectory we’re on, it’s not at all hard to imagine that there could come a time when there’s no unconsumed production at all. This would be a “subsistence” economy.
It’s IMPOSSIBLE to live in a world where beans have no value at all, but not impossible to live in one where cars, machines and gold are all utterly valueless. That’s not a prediction but if you spend some extended time at a craps table, your view of what can and can’t happen will change.
The prices that fell weren’t the prices of gold and silver…they were the prices of promises from banks to deliver gold and silver in the future. And they fell right after one of the largest of those banks revealed to the whole world that they’d been printing promises they couldn’t actually honor.
A world in which gold and silver have no value is a world in which human civilization has completely collapsed, I am sufficiently useless to be assuredly either dead or dying, and so is everyone I know and care about. It’s definitely possible, but frankly I feel no special desire to prepare for it…if humanity falls apart that far, I don’t actually _want_ to see what’s next.
Even if the price of actual gold (as opposed to demonstrably-empty promises) were to fall significantly, I’d have confidence that its value would continue to be of use to me in the event of a disaster, and would still own it.
But that being said, gold and silver are hedges, not investments. An investment must generate a return. Gold and silver just sit there, looking pretty. They might gain or lose value against other goods, but exploiting that effect is basically just a form of gambling. I’m not against gambling if that’s what folks like to do, but facts are facts, and one of the eternal facts of life is that sometimes gamblers lose. Some of them lost, this week, and lost big. It happens.