why is gold and silver going down right now?

If only the SC Treasurer's office had provided footnotes in their report. Not that it would have made much difference to me. I'm a buyer regardless of whether or not the allegations are true.

My guess is that the REAL buying power of gold won't be known until we actually have to use it to purchase goods and services. If and when that time comes, we may thank the Fed et. al. for artificially holding the price of gold down so we could purchase more of it.

 

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My response would be that:

1. The treasurer of a small state like SC is not in the "in" crowd. He most likely has as much "insider knowledge" as I do.
2. He is also a politician in a conservative state. He is playing to his constituency.

I think you put too much faith in these politicians being that connected or bright.

 

True. Nevertheless, I still contend that gold is SERIOUSLY undervalued. That's why I intend to increase my holdings in it.

Regardless of whether they're doing it or not, there are LOTS of good reasons for the Feds to keep the rise in the price of gold under control . . . at least for as long as they can. Just as I now look back on what I paid for my MS-63 Saints in 1992 with a great deal of fondness, I'm convinced it won't take long before I look back on what I'll pay for gold today with the same (or perhaps an even greater) degree of fondness.

 

If you are convinced its undervalued, then go for it. I would simply say those who bought those same saints in the 80's were not looking at their sale price in 1992 as fondly as you were. Yes, cycles can be ridden out, but that does you no good if you need the money today. I know how you feel, though, as I remember buying french roosters for $69, and junk US silver for 3x face.

 

Good advice. Your argument about the possibility of needing the money today is why I'm not prepared to bet the farm on gold. But I doubt anyone would argue against the prudence of holding 10% of one's investments in gold, and that's the level I'm looking to achieve.

 

You would have no disagreements from me sir if you are wishing to put aside 10% in PM as a diversification measure. Good luck!

 

Thanks.

 

It is completely illogical to assume the state that a person resides in, or is from, has much bearing on on whether they are insiders or have detailed knowledge of the finance industry. Hugh McColl, who engineered the mergers of hundreds of banks into Bank of America, the largest bank in the USA (despite its issues) lives and ran BofA just 90 miles from the SC State Capital. BofA's HQ likewise is just 90 miles from there, along with the eastern HQ of Wells Fargo, and the bulk of Ally Bank is there as well. I'd say that he might know a few banksters given that many of them live in SC.

Of course such statements, IMO, only serve to discredit rather than address the points being made.

 

I did much the same thing in the late 1970's: The more G&S went up, the more I was convinced they could never really go down. The worse inflation got (there was real inflation back then), the more PM I bought. The worse the world situation got, in Afgan. & Iran, the more PM I bought. I was convinced hyper-inflation was "inevitable", & that people who didn't understand that were schmucks who would be very sorry when their "fiat currency" became worthless. I didn't yet understand anything about inevitable market cycles, or the concept of "taking a profit".

When it all crashed, it happened so fast it was stunning, & suddenly I didn't feel so good. BTW, I've been told many, many times on PM forums that all of that is "irrelevant", has nothing to do with present day events, not comparable, you name it.....you can't talk people down out of a mania or bubble.....I tried that with a couple of people obsessed with tech stocks in the late '90's, went nowhere.....

 

Thanks Woody. There's a great debate about "This time is different" and valid points abound on both sides.

 

Of course, the points on one side are likely to turn out to be completely invalid. We just don't know which side yet.

 

Yeah, sucks doesn't it. I sure wish I had the knowledge others seem to have on which way the market "has" to go. It would make sleeping at night easier.

Myself, I know long term it has to go up, the price of gold seems in line with long term historical averages, (silver touch high but not much), so I simply do not "know". I am comfortable enough to buy coins made of PM if I like the coin, but not anywhere where I "back the truck up" buying or selling.

 

You didn't mention what caused gold to go down. It seems to me this might deserve a word or two so that one can determine if the same events are happening now. Gold collapsed in the 80s because the Federal Reserve, which was still operating on sane rules at the time, raised interest rates to 20%. When interest hit these levels it makes absolutely no sense to own PMs. NONE. You can simply put your cash in a simple and fully insured and very liquid bank savings account and make a ton of money without any risk what so ever. People did just this.

There is no such thing as a "market cycle".

 

I think gold will go higher from here, but at some price the right thing to do is sell most of it and move on. It is only the long term holders who will be hurt by holding on through the next 20 year depression in gold. That's too much lost compounding for my taste.

 

Like the last 20 depression in gold when I was buying MS-63 Saints for $495 each?

 

Past performance does not guarantee future performance. In fact it has nothing to do with it at all. If you have reasons you believe gold will up, go for it.
As you mentioned 10% of you portfolio is a reasonable amount, but please don't use the last 20 years as a reason to buy gold now. That is a real sucker's play.

Mike

 

Of course, if you had purchased US Treasury bonds instead, you would be ahead right now, but we aren't keeping score.

 

I don't. But it doesn't hurt to know that I could take a big loss on my recent gold purchases and still be profitable overall.

 

Yep. Did that too.

 

I would suggest a different way to think about it. What's yours is yours. There is no "house money" in the market. A loss from today hurts you just as much if you purchased the PMs yesterday as it would if you purchased them 20 years ago. It is a good idea to always mark-to-market in you own mind to prevent large losses in market value from creeping up on you.