Is anybody still buying silver and gold?

The key difference here is that you can't conjure physical gold and silver out of thin air like paper stocks which split regularly, which is the reason why they are stores of value. For one because they can't be manipulated (paper market is another story) so the intrinsic value remains supported, and subsequently because people know the supply can't be manipulated it is more appealing than other things that can be. Precious metals are about the only thing that fit into this category that are also fungible, meaning no matter what state the element is in it has the same fractional base value.

As far as the super cycles go the 100 year DOW/Gold ratio chart shows that we are on the tail end of the swing back to the price of the DOW and gold being equivalent to each other. Some might call it a bubble, but regardless it is a clear trend that will see gold continue to rise in purchasing power (maybe not necessarily price) as long as the trend remains supported.

 

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If gold and the Dow cross, I'd run away if I were you. In fact, I'm planning to myself. The last time that happened, the gold party came to an end. It may come to an end well before the two cross.

I should say there was a rebound after 1980's peak. One could have gotten out in 1981 at $650. The trouble was, anyone who had anything to do with gold said that the metal would go back to four digits...and their reasons were seductively plausible. Inflation was still in double digits then. The only warning sign was real interest rates shooting up to high levels. Even that was explained away as the bond market anticipating higher inflation down the road. Many believed them.

It's vey hard to get out when you should once there's a real bubble. Even getting out after it's cracked is very hard. That's why so many people ride the burst bubble back down after riding its expansion.

Of course, I except margin calls

 

Good post.

Gold and Dow crossing will not happen simply because they are different models, on different basis, it was simply a coincidence they were similar before. Same thing with gold/silver ratios. They are so dissimilar they don't mean much except for people trying to "see" something in the numbers. Humans always try to read things into numbers, see patterns, etc. It is how gamblers get hooked, and really is a hard trait to get past. I know I fall prey to it sometimes as well, even though I have read a lot about the subject.

 

Thanks.

Sadly, it's easy for a knowledgable person to get hooked when a bubble's blowing. Not only are all the experts bullish, but also they have long-term credibility: they were the ones who were bullish long before the general public. They've also become used to dismissing skeptics, which has worked marvellously for them. Calls of "bubble" were made about gold as far back as early '06, when gold went above $700. Any gold bull who listened and sold out missed most of the bull market. There have been calls of "bubble" in early '08, late '09, and late last year. There may have been more. Gold was supposedly "finished" when it briefly sunk below $700 in the '08 crisis.

In order to stay the course, a gold bull has to brush off a lot of negativity - including false or premature cries of "bubble." Once the gold bull finally cracks, all the long-term pros will simply categorize it as another pullback. "Just like '08: just you wait and see."

The people who spot the bubble and yell about it - even if they're right - will be lumped in with the gold skeptics who cried wolf too many times.

That's the psychodynamics of a bubble. Anyone who spots trouble will wonder if (s)he's like the skeptics who've been refuted time and again. The ones who stuck with gold have become habituated to any major decline being a mere correction. They're also habituated to thinking of bears as idiots, or biased, or misguided. Weren't the "gold haters" proven wrong several times beforehand? "What else do you need to know about their bias?" [This last dynamic's the killer.]

Everyone knows that Paul Volcker killed off inflation. In 1979, 1980 and 1981, though, most everyone was scoffing at him. It was held almost unanimously in the goldbug circuit that Volcker would eventually fold and go back to inflating becasue of the economic pain his tightening caused. It was held almost unanimously that, once Volcker cracked, inflation would go up to 20% and more. The only ones who expressed doubts, in 1981, were Harry Browne and Terry Coxon: their doubts were in the context of a portfolio plan that would also protect against any futher inflation should it have come roaring back.

Volcker did turn on the money spigots in mid-1982 during the Mexican banking crisis. By that time, though, inflation's back had been broken. The new money pushed up the stock market (and gold to an extent, but the prime beneficiary was the stock market.) Inflation remained in single digits, and kept drifting lower. Gold languished until 2001.

My guess as to the next downward turn of the gold tide is a budget deal that really cuts spending. I've already been told by a professional that such an occurrence is highly unlikely. "As 'highly unlikely' as Volcker breaking the back of inflation," I thought in reply - but I didn't push the point.

 

While I do like charts for some things, I use them more as a gas/brake pedal than a steering wheel. The reasons behind why gold is going so high are more important to my outlook than anything else. I do agree that if the DOW and gold cross, or even get to 2:1 I would think we are near the top, and after that metals will not be as attractive. They are very different things and any correlation is not an exact science, however it has been consistent over the course of the century that the higher the DOW is measured against gold the harder gold snaps back over the course of the cycle. Could it be a coincidence, possibly, but I don't think it is. There's really no telling how far the ratio may become skewed, because there are so many never before seen circumstances in play right now, but the momentum is clear and it's not going to change all by itself for no reason.

 

don't just depend on the charts, depend on reality: as long as governments keep abusing their powers and banks/corporations keep mishandling finances - safe havens (including precious metals) will always soar because of fear and possible loss of money. the consequences of abuse are not felt immediately because people always tend to kick the can down the road before doing something about it. usually it is too late when they start fixing it.

i think i said this before in another thread, but i used to believe everything will happen fast (economies crashing for this decade), but i realized that people, especially desperate ones, will do A LOT just to hide things and try their best to not let go of their destructive decisions. sort of trying to wish their self-made problems away.

i am still buying especially on the dips. and i hope there is a dip before this year ends as it's getting too expensive to buy PMs. i was supposed to buy this monday morning but i held off because of the price jump.

 

The nice part about charts is that they tell you what the market thinks. If you have strongly held beliefs about gold and silver, and it turns out the market disagrees with you, you will lose a large percentage of your investment no matter how "correct" you believe you are. You say that the PMs soar when certain conditions prevail, and you are correct. But what you miss is that they have already soared and it could be very late in the bull market. And remember, buying on the dips with tech stocks in the late 90s worked right up until the point where the market dipped, kept going, and never came back. And because so many folks had been trained to buy the dips, many lost much more money than they previously made.

For the sake of full disclosure, I believe there is more left in the PM bull market, but this isn't the time in the cycle to get complacent or hidebound in your thinking about them.

 

"Sad to say, I missed the turn in '99." Man, I'm so happy I never missed any of those major market turns. I'd be on my yacht off the coast of France right now if I'd have forseen the G&S crash in 1980, or the 3 year bear market in stocks that began in 2000.

I did catch the bottom in stocks in early 2009, but I didn't see this latest stock market crash, or crash-ette, coming. I should've known, when maybe 100 US govt. officials were threatening, for weeks, to throw the US into default. That whole ridiculous scene I'm thinking, really did some damage. I don't even mean to get political; but it seems like investors around the world are just disgusted with us.

Last week, & today, investors are puking up stocks, including great solid US multinationals with good dividends, to to rush into G&S at ever higher prices. At some point & price, you truly have to believe that the USD will become like German currency in the 1920's, to justify "paying any price" for G&S.

 

Diversification , maybe four categories to include Pm's in a collectible form and bullion. After that you might be able to grow a window garden.

Pep

 

It's fairly easy to find cheap silver (below melt).

But where do you find cheap gold? (not necessarily under spot, but the lowest premium incl shipping)

 

Buying silver $1 below melt or gold at melt might not turn out to be "cheap. When silver was below $20 I tried to tell folks that buying silver for $18 when spot was $15 was a better deal than buying silver for $19 when silver was $20, but most disagreed or didn't get the point that price is everything in commodities. You may want to consider whether gold and silver are "absolute" bargains at the present time before searching for "relative" bargains compared to spot.

 

Very good point. If someone spends all of their time just trying to "catch a deal" relative to the market, they are the equivalent of day traders in stocks. This isn't bad if you are simply going to flip, but if you want to hold long term its not where to start.

There are two types of stock traders, ones who think long term and try to decide if this $30 stock will be worth $90 in a few years because of improving fundamentals, increased sales, new product introductions, current market incorrectly valuing it, etc. The second type simply accepts the price is what it is, and tries to make money on the margins, buy/sell spreads, intraday trading, weekly variations, etc.

I have never been a strong believer in the second type. I know money can be made by astute traders, but it just doesn't interest me. I prefer to step back and look at an asset and decide what I feel its long term value will be, and buy those which I think I will be happy with in the next decade.

If you are a short term trader, I would simply advise to be careful since some of the smartest and quick thinking people I have ever met do that for a living.

Just one word of advise to everyone. I know a lot of people have made a lot of money with silver and gold here. Make sure you do not overestimate your market predicting abilities just because you made this money. I remember the dotcom era well, with tens of thousands thinking they were geniuses because they were day trading in tech stocks and winning. Believing in a market when it is on a bull run has the tendency to make a person think they REALLY know what they are doing, and that this will continue forever because they believe it will. How many day traders have you heard of in the last decade? I am simply saying this because a lot of people I knew lost a LOT of money believing that gold and silver HAD to come back to their 1980 levels, and kept chasing it through the 1980's. I am not silly enough to be predicting an end of PM bull run, just throwing out a caution to everyone to please keep an open mind, and realize all bull runs eventually run out of steam. I would hate to see anyone here to chase after a bull like all of those dealers I saw in the 80's.

 

I didn't like what the market did yesterday so I went to the coin store and bought a few items:

2008 silver proof set (trying to collect one for each year)
1883 S Morgan dollar
6 mercury dimes ranging from 1929 to 1938
1870 Victoria shilling
1838 Victoria groat (pretty worn)

If this is a bubble, I won't regret it, because these are for my long-term emergency fund anyway. Not to mention I enjoy them as collectibles.

Gold is way too high for my income at this time.

 

I'm not afraid to buy gold here. When you dollar cost average you'll end up buying at the peaks sometimes.

 

You explained it betterthan I did. Trying to buy at or below spot while ignoring whether the spot price may be too high is like day trading. And with the large bid/ask spreads on PMs, that will be a loser's game in the long run.

 

OK, I won't use the word 'cheap' or 'deal' anymore when referring to gold purchases. Of course if it goes up to $2000/oz in the near future, then I will refer to the Aug 9th price as having been cheap.

So far the lowest prices over spot I've found were at Provident and Gainesville.

 

I'm holding myself back from buying. I'm indecisive. I want to go right now and buy a bunch of dimes to finish up my Mercury/Roosevelt collection that I'm so near to completing. But the angel on the side of my shoulder says 'No'. Lol.

 

Sill buying and I will continue to buy as long as the powers that be act irresponsibly with our money. But I only buy as a way of saving money, instead of putting 200.00 in the savings account, I buy 200.00 worth of silver.

 

I would say that if you are buying a collectible coin go ahead. I am not afraid of buying silver or gold coins today, I am just not buying items that is only dependent on gold or silver prices.

I consider collectible coins "return" as your enjoyment. Enjoy your hobby, man, regardless of metal prices. If you think silver is high I wouldn't be buying a lot of "junk" dimes right now, but all collectible coins to me are immune to gold/silver talk. I just bought a bunch of pretty French silver coins the other day. I could care less that silver is high, I like them, I enjoy them, so that is all that matters.

To me, coin collecting is all about spending money on a hobby as enjoyment. The fact my wife will be able to sell the stuff off for money is just an aside. I get full value from them just owning and studying them. If you do the same, then no matter what prices do in the future, you are already ahead.

PM discussions are for asset allocation of investment dollars, and should be completely separate from coin collecting decisions. It is for me anyway.

Chris

 

Thanks Chris. I agree. I'm kinda doing both, although collecting as a hobby takes precedence before investment. Gonna go get some mercury dimes. I just need ten to coplete a set, although I'm sure I will want to upgrade. Stephen