By: John Fisher
You will hear this warning often during the course of this bull market in the precious metals. Always, always remember – gold and silver climb a “Wall of Worry” all the way through Stage Two of a three stage bull market. And the bull is bucking hard right now, trying his best to throw off as many as he can on this market dip.
Take note of those hollering the loudest now – and note again when they reverse course, for they will.
Now, as Dragnet‘s Sgt. Joe Friday frequently implored female informants to provide “Just the facts, ma’am,” let’s take a look at the facts:
Despite gold recently reaching a new all time high of above $1,250 per ounce, gold’s high in 1980 of $850 per ounce adjusted for the CPI index equals $2,485 per ounce in today’s dollars. Once you account for how the CPI understates inflation, gold’s high in 1980 was $5,241 per ounce in today’s dollars.
This gold bull market has much, much further to run.
Silver’s high in 1980 of $49.45 per ounce adjusted for the CPI index equals $130 per ounce in today’s dollars. Silver will outperform gold by a factor of 4. That is a lock!
The Dow Jones divided by the price of gold. After the inflationary crisis of the 1970s, the Dow/Gold ratio bottomed at 1:1. The Dow /Gold ratio as evidenced in the chart below will go to an absolute minimum of 5:1 and very probably 1:1. You pick the numbers: $2000 Gold/10,000 Dow? $2500 Gold/7,500 Dow? $5000 Gold/5000 Dow?
The average American has been earning less per hour (adjusted for real inflation) and seeing a decline in their standard of living since the early 1970s after we left the gold standard. Honestly, what is going to cause this to change given our current monetary and fiscal policy?
The St. Louis Adjusted Monetary Base is the total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank’s reserves. Someone went on a spending binge that hasn’t seemed to help other than take us to a level of debt from which we will never return. And, after the recent G-8 and G-20 Summits, it was announced that another wave of stimulus is in the works.
All Things Considered – John’s Commentary
Action to take now:
Two things to do:
- Get on
- Hold on
Get on – I’m not talking about your life savings. 5-20% in most cases is appropriate. What are your other investment alternatives? If you’re not on, just dip your toe in the water and get started.
Hold on – Too many people are going to get off too early due to the Wall of Worry and the Bull bucking. ALWAYS stay with the primary trend! The primary trend of precious metals is up.
What to buy: In gold, premiums have come down significantly on Krugerrands and Maple Leafs. I still like the US Arts Medallions and Austrian 100 Corona’s for the greatest bang for the buck. Silver – cheap, cheap, cheap, cheap 90% pre-1965 silver coin. I found a great buy on generic 1-oz. silver rounds, fifty cents less expensive than usual.
Quote of the day: “The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians.” – Henry Hazlitt
