In fact you can be quite certain that in the fight against paper money, physical gold will have quite a rocky ride. Just witness the last ten years.
But there’s one thing I do know – and you know it too. The spending value of EVERY paper currency that has ever been printed in the history of the world has always been reduced to almost zero in less than two generations. That’s right – not a single paper currency has ever lasted. I cannot see into the future but I can see into the past. With the banking sector in the mess it is in right now, I see holding physical gold and silver an absolute must.
The price of gold has fallen over the past four years as “clever quantatitive easing” fools everyone into thinking this is a new age. What nonsense.
Gold may well fall further in price – that’s fine too. I’m not planning to sell anytime soon. For those of you who do not have enough gold yet, the fact that it is cheaper now than it was four years ago surely is a good thing. You can’t have it both ways. just make sure you have enough to protect you and your family before the price goes through the roof.
Physical gold is in short supply and new gold coming onto the market only increases by about 2.5% a year, Now compare that with the supply of new money which is well over 10 times that amount. Which do you think will lose its value the most, paper money or gold? Printing money is the new way of solving the debt crisis – that is absolute nonsense and you know it.
Despite the massive rise in gold over the last ten years it still remains cheap compared with the 1980 high of $850. Just to keep up with inflation it should be worth $2,500 today and even then it would have only kept pace with inflation. I know I can trust gold in the long term because it has survived for thousands of years. On the other hand, a pound sterling today will buy 99% LESS than it would just one hundred years ago. What is there not to like about gold? I don’t trust paper money and I don’t trust banks or governments.
I believe that the real bull market in gold hasn’t even started yet.
Over the last two years everyone has been talking about the gold sell off. That simply isn’t true. For every seller there has to be a buyer and right now there is a massive migration of gold from West to East.
When people realise that gold is the only form of real money the mania stage will kick in. Yes there will be dips along the way, some big ones, but I will see those as buying opportunities as gold heads even higher, and silver follows suit.
The old adage was that you should always have 10% of your wealth in gold. I am inclined to have more. Meanwhile anyone who has more than the protected maximum of cash in a bank (£85,000 or €100,000) must be insane. Money in the bank is losing value every day thanks to inflation caused by the central banks printing more and more to try to finance government expenditure. Right now the US Fed is printing $85 billion a month. That is not a mis-print.
So, if gold is so desirable why has the gold price dropped these last few years? Good question.
The problem is there are two types of gold – physical gold and paper gold. Remember, paper gold is merely an IOU that says someone somewhere is holding gold on your behalf. Good luck with that one. It is estimated that for each ounce of physical gold there are over 100 “ounces” of paper gold. With only one bench mark for the gold price, when paper gold is sold off, the price of physical gold falls along with it. This gives the Chinese the chance to buy even more of the gold from the West at a bargain price.
My view is that you should split your wealth four ways – 25% in commodities (inc gold), 25% in property, 25% in cash and 25% to play with as opportunities arise.
In 2015 I believe the price of gold will start moving upwards once more. The Chinese will announce that there gold holdings are three times what everyone thinks or the Comex market will not be able to pay out a claim in real gold and will offer paper currency instead. (Many are calling this Zero Hour when the physical and paper gold prices go in opposite directions).