Pandemic & Gold


Gold and silver normally rise in price (but not in value) during times of panic.

I keep a supply of gold coins and wafers as insurance for times of panic or hyper inflation.

gold

1/10th ounce Cuban gold coins.

A recent article at this site “Pandemic Inflation” looked at why we should expect the current massive government spending to create inflation.

This does not mean that we should make a investments in gold and silver at this time.

There are two reasons we should  invest in gold and silver.

The first purpose of precious metals is to act as insurance that protects us from economic catastrophes like the one we face now.  But insurance is best purchased before the calamity.   You should already have your precious metals insurance.

If you don’t, get it, but you’ll pay a premium.  The price of gold is volatile, at a seven year high and  dealers who cannot keep up with demand are charging ridiculous premiums even for gold they cannot deliver.

If you do not have a portion of your portfolio in precious metals (I like to keep a couple of years of living expenses), bit the bullet and cover yourself now.  Gold’s price could go much higher. There is absolutely no need for you to pay exorbitant premiums for metal you cannot not receive for a month or more nor ongoing storage fees.

You can see how to get the best deal on your purchases right now at Asset Strategies International.

The second purpose of precious metals is as a speculation. I have written about powerful ways to speculate in gold, silver and platinum in my report, “The Silver Dip”.

Here’s one reason why you have not heard much about the Silver Dip recently.

A Purposeful Investing Course subscriber recently sent this question:

Gary – I have not heard much about the Silver dip since the markets have plunged and Corona virus news dominates. What is the current view?  Thanks

One of several reasons I have not been writing about the Silver Dip right now is that gold is not priced at a good value.

The Silver Dip is a speculative tactic that is first and foremost based on the real value of gold.

The excerpts below from the “Silver Dip 2019” report shows why I do not feel it’s good value now.

Gold and silver combat inflation.

The chart below shows how gold and silver have pretty much kept pace with inflation long term.

It requires about the same weight of gold or silver today to buy a car, go to a movie or rent a car as it did in 1942. Gold or silver today will buy quite a bit more coffee, sugar or milk than it did in 1942 (one reason why food prices are now accelerating).

Gold and silver have appreciated a lot since 1942. How much are they worth now? What is their real value?

This of course is THE golden question… so let’s compare prices.

Here’s a chart I prepared for the Silver Dip 2015 report and since there has not been a lot of inflation, I have not updated it.

silver

The excerpt continues:

Gaining a true perspective is difficult because gold and silver prices were held at fixed prices for so many years. This distorts the accuracy of the picture. Statistics can also be misleading.

We could spend a lot of time trying to devise a more accurate picture, but this review provides a broad understanding of the relation to the price of gold and silver and cost of living.

The gold price of $33.85 an ounce (before the end of WWII and the huge inflation this conflict created), is the more accurate than the price at the end of the war. We use this price and the costs of 1942 houses and cars and wages in this comparison. Houses, cars and wages took a big jump due to war fueled inflation.

The price of gold and silver were artificially kept low in 1947.Since 1942 US median income increased 29 times.

House prices rose from 1942 until 2016 47 times.

Cars jumped 36 times.

Gold was up 33 times from its value in 1942.

Silver was up 38 times in the same period.

If these conclusions are accurate, it means that gold and silver were reasonable hedges against inflation.

The price of gold and silver are likely to continue rising and falling along their medians. If the conclusions of the inflation comparison are correct, anytime silver drops much below $14, it is a good value.

Gold at or below $1,350 is also likely a good deal and the foundation of the Value Dip strategy is that ideal conditions are best when gold is in this price range.

There you have it.  Once gold’s price shoots much past $1,350, The Silver Dip increases in risk and loses its value protection.

The current chart of gold’s price shows that gold started to surge past it’s good value point not long after we released the Silver Dip 2019 report in early 2019.

silver

This graph suggests that gold is a poor value in its current price range over $1,700.  Even if the gold silver ratio and the gold platinum ratio indicate that silver and platinum are better value than gold, they are all poor value investments.

Gary