For some time, I have advocated pulling money from stocks or bonds, which support the capitalist supremacy and investing in precious metals, primarily gold and silver. I had predicted that these would increase significantly in value eventually. Even if not, they are far safer investments because even if they lose value, that loss is limited.
As of this past week, gold and silver have risen sharply in value as investors pull funding from the stock market and lose faith in the future stability of the dollar.
At the time I am writing this, gold is up to $1947.84/oz and silver is up to $24.25/oz. For gold, this is a one year increase of $517.79 (36.35%). For silver, this is a one year increase of $7.69 (46.76%). So, in terms of percentage, silver is outpacing gold by a considerable amount.
Precious metals have commercial industrial applications. However, global manufacturing has virtually collapsed in the past few months and will only collapse further as economic conditions intensify. That decreased use would seem to suppress the market and indeed does. This indicates that the increase in price is purely via investment at this time. However, if prices remain elevated and production does increase in the future, it will cause an even steeper increase in precious metals pricing.
The value of precious metals in the west have been highly manipulated and suppressed by certain entities, like JP Morgan, who was shown to own roughly 80% of silver investments for years. Now, with their liquidity dissolving, that control has slipped and will only continue to deteriorate.
Silver mining firms have had mines shut in for some time, with the value not being worth the cost of extraction. Now that silver is rising again, some of those mines are being reactivated. One may think that increased production will force the price down but that isn’t true because of futures trading and the fact that precious metals dealers are out of stock, while some are taking pre-orders at current prices. That means the price will remain stable or continue to increase for some time.
Many people are claiming that the Chinese remnimbi (yuan) is going to collapse because people are withdrawing large sums of money from banks. Do not confuse bank failure with currency failure. The value of any currency is determined by trading and spending, in other words, the velocity of the currency. Even if the remnimbi reduces in value, it can only decline to a limited degree because it is backed by precious metals, primarily gold. This means the increase of precious metals pricing literally makes that currency more stable in comparison to fiat currencies like the dollar.
Much of the same holds true for the Russian ruble. Both countries have been stockpiling gold for years.
Precious metals tend to be inflation and recession-proof. If the value of the dollar declines, as it is doing now, prices on consumer goods will increase. However, metals are valued on the international market. If we see a decline in the value of the dollar of 10%, that means the price of a given metal will increase by the same amount.
Some speculators and experts in precious metals believe that metals can increase in value far more than we see now. That gold could easily rise to $3000/oz. I could see that happening. Some claim silver can reach as high as $30 or even $50/oz. I think somewhere in between is most likely. We may see these number within the next 2 years or less if things continue as they have been.
Obviously, there will be some volatility involved, as investors hoard and then are forced to sell or sell for short term profit, rather than long term gain. We’ve seen this happen with stocks, metals and cryptocurrencies in the recent past.
I still advise against metals certificates or funds. Many of these funds claim to hold your metals in some vault, yet have been shown to not have the amount of metals they claim to possess. When investors have tried to cash in for the physical metal, especially gold, they meet with resistance, in past cases for over a year and eventually winding up in court to take possession. These funds are highly leveraged, selling far more than is in their possession. Some I am sure are on the level but the problem is you don’t know until it is too late.
If we see a run on banks in the US, there will also be a run on metals depositories. If they are too highly leveraged, it means they will declare bankruptcy and you, as an investor, will lose whatever money you have deposited. Meanwhile their executives will walk away with massive bonuses.
I am not saying to not invest in metals at this time. If you do, only invest in physical metals, which you hold in your possession. It will have to be at least an intermediate to long term investment, as you will not receive the physical metals for some time at this point. By the time you do, it will likely increase in value. Even if it decreases slightly, I’d hold onto it long term it as a secure hedge against inflation, recession and fall of the dollar. Just be sure you have a safe and secure place to keep it.