by JarHeadTed
March 01, 2011 14:47
I can almost hear Burl Ives singing the song from the old Rudolph cartoon now.
Today gold closed at a new high and silver closed at the highest it has been since 1980. I have a few thoughts on that. But first a little background on my views. The US has an enourmous amount of public debt. As a matter of fact, there was a point last month when our public debt overcame our GDP. That can't be good. Furthermore, the US dollar is backed by nothing but a promise that the US government will stand behind the dollar and guarantee it's value and solvency. How can they do that....historically we were on the gold standard until the early 1970's. When we switched to a fiat currency, the ever expanding and historically strengthening US economy gave the government enough clout to back the US dollar with their word.
Things have gone wrong somewhere along the way. How many headlines have you noticed that mention other countries looking for something to replace the dollar for this or that. Oil is traded in US dollars all over the world....or was. China and a Russia (I believe) started trading oil in their own currencies with each other last year. France and other European countries talk of a one world type currency or designating another currency to replace the dollar as the one currency by which the world's markets are governed. It's only a matter of time. Once that happens Americans won't enjoy the perks we get for "owning" the currency of choice.
Therefore I'm not so sure that gold and silver are on the rise so much as the dollar is on the fall.
That said, I have a suggestion that everyone who stumbles onto this blog start looking at purchasing gold or silver in whatever increments you can afford as a hedge against the deep drop in the dollar (or a rise in precious metal, whichever makes you warm and fuzzy inside).
Silver was trading at around $27 in January. Today it closed at $34.48. I collect Walking Liberty half dollars. I think they are the most attractive coin the US has ever minted. I have this pawn shop in my home town that was selling them for $10 a pop. This was right at the value of the metal when melted (melt value). The owner hadn't changed the price in a while as I slowly accumulated a few of these coins from him. Yesterday I dropped by to pick up another one. Two things would have shocked me had I not been paying attention. First of all, there where far fewer coins than there had been in the past. Someone else was buying these things, and quicker than I. Second, he bumped the price up to $12 a piece. I guess I was spoiled a little because I still bought one, but I complained about the price even though $12 is still below the current melt value.
The moral of the story is, buy some silver and gold to guard against bad times and inflation. If a worst case scenario happens you will be glad you did. What is that worst case scenario? Ask yourself that question. I don't want to be labeled an alarmist.....not yet.