Gold is Not the Only Salvation
This article is an oldie, but goodie. It is worth the read. CHeck the content of what he was writing about in 2009 and apply it to the context of today’s marketplace. Almost eery.
February 18, 2009 – by Bill Haynes
A recent mineweb.com article, “Is gold the only salvation from this financial Armageddon?” suggests not only that gold offers a solution to the financial crisis but notes something of which many Americans are not aware: that European banks may be in worse shape than American banks. The author further asserts that the worst is yet to come as far as European banks are concerned. Massive inflation lies ahead for Europeans.
Gold aside, the Establishment solution to the problem is to print more money, both dollars and euros. I maintain that any official use of gold in the world’s monetary system will not come until forced upon governments by the people’s rejection of paper money. When freshly printed money will no longer buy what governments want, they will be forced then to return to gold. Until then, we will have inflation.
Meanwhile, the article is an excellent read in that it further clarifies the extent of the financial crises. Still, there is an issue I take exception with.
The author declares that silver is not really a monetary metal any longer. This position is often thrown around as a reason for not buying silver during financial crises. I disagree and submit that investors who eschew silver because of this position miss an opportunity to make still greater profits during this financial meltdown. (Actually, “profits” is not the right word. Generally, gold and silver buyers are not seeking profits but hedges against inflation and currency devaluation.)
Regardless, my studies and observations of the precious metals markets convince me that silver turns in greater returns in bull markets than does gold. The writer acknowledges as much when he notes that “even though history tells us that silver’s volatility leads it to perform better than gold in percentage terms on the upside and worse on the downside. . . We are in a different situation with silver not really a monetary metal any longer. Industrial demand pressures on silver may well mitigate any price rises here.”
Both metals have been used as money for thousands of years. Now, just because there are many industrial uses for silver, this writer and others assert silver is no longer a monetary metal. While it is true that the IMF, which keeps track of how much gold nations hold, does not care about silver, in the end it is really people, not governments or the IMF, that determine what is to serve as money.
Yes, today we’re using government-issued paper currencies and computer entries not redeemable in gold or silver as money. But, the flaws of such currencies are becoming readily apparent. Governments around the world are inflating their money supplies in efforts to stave of recessions (depressions?) And, the people are starting to move to protect the “fruits of their labors” from inflation by buying silver as well as gold.
And rightfully so. More people have used silver as money than have used gold. Because of Roosevelt’s 1933 gold call-in, Americans have not use gold as money for 76 years. Silver coins, however, were minted until 1965. Actually, silver has nearly always been the circulating medium in hard money monetary systems because gold has too much value for day-to-day transactions.
All this brings me to this point: when the masses go to buy gold bullion, they will buy silver bullion instead of gold because with silver they get more physical metal for the money. Buying by the masses will, in my estimation, propel the price of silver much higher, on a percentage basis, than gold, driving the gold-silver price ratio to 30, perhaps even 20.
Now, that’s a bullish outlook for silver, a longtime monetary metal that just happens to have a myriad of industrial uses. The industrial demand for silver is not a negative, as the writer of the aforementioned article says, but is, in fact, a strong positive for silver.
