One advantage of founding The Prospector Site is feeling free to pass along unbiased facts on gold and silver. Companies selling or buying gold may create a level of doubt even if information is 100% factual. Many beginners, experts, and everything in between are trying to wrap their minds around the benefits of gold/silver ownership. The rest of this post will be nothing but answering the nagging question ” is gold or silver a good place for your money in 2011?”
This morning I watched two metal analysts argue both pro and con on this very question. Both represented their side well but both missed the main point to owning precious metals. The “con” argued that gold represented nothing but a mass of metal that pays no dividend with no way to prove it isn’t now over inflated. I say all this is true. The “pro” argued gold is a safe haven and a great storage for wealth. I say all this is true. So with both sides providing truths on gold who the heck is right?
WHAT IS GOLD? The analysts were correct in saying gold is a mass of metal. What they didn’t understand gold is the most corrosive resistant, long-lasting, and one of the most rare metals on earth. This is why chosen over wood or rocks several thousand years ago as people started to form some type of currency for trade. The traders that did well then needed some way to store wealth so gold made sense for storage. Gold was, and still is, transferable everywhere on earth. Many people don’t realize an ounce of gold in United States brings the same value in all countries elsewhere. This is unlike currencies that trade up or down from each other.
I can’t pull a piece of gold out and duplicate it when no one is looking. I can’t take a hunk of iron to my local jewelry store and switch it for gold when no one is looking. Gold is nearly impossible to counterfeit by way of its molecular structure. The only thing that can replicate gold is the same amount of gold! We can’t say the same for dollars, or euros, or yuan, or yen.
MISSING THE POINT: Not one person on this earth can honestly tell you what gold will be worth next week. Many experts expect gold to rise or hold its value but if they had to bet the farm on it most wouldn’t. I have said several times we are in uncharted waters including all economies around the world. What used to be safe and secure investing avenues now seem not so sure. The new age of electronic transfer and information exchanges, at the speed of light, has changed the world forever.
But everything we spend money on has to have a “bench mark” behind it. A deed of land has to have a bench mark or survey to verify place according to a stationary mark or standard. An earthquake registers only by a Richter scale that measures movement according to a level of calm or standard. Everything of value has to be based off something relevant first. An item or asset can increase or decrease freely but must first be based from a value bench mark. The only true standard for money is gold. Unfortunately, US dollars are no longer tied to gold like they used to be. Things started going up in cost the minute we broke from a gold standard.
We often use something great as a bench mark. I wrote a post the other day comparing something great to Michael Jordan. Jordan has become the standard of what greatness compares to. The problem is not even Micheal’s standard is “true” enough to replace gold as the test or standard of value. Gold is what the value of all things made, manufactured, bought, and sold come from. With out this standard prices of things can float along with value being gauged only by market value. This is exactly what the dollars in your pocket have become. A baseless, limitless, and now paperless form of money that has no limits. If a country or government wants more money they simply push a computer button and another zero appears on some balance sheet. Based on nothing and valued from nothing.
GOLD AS MONEY: To answer if gold is overpriced is difficult. The US dollar, and other printed papers of currency, have drifted so far from a gold standard it is hard to say what part of gold’s value comes from real gold compared to speculation. We have become so saturated with worthless dollars we have lost perspective of value. If you doubt this take a minute and call grandma asking her what things used to cost. Prices of “things” would still be close to the same as granny’s day if a gold standard would have been left in place. Gold is not only the best standard it is the only real money (silver too).
What is for sure is the dollars in your wallet are not buying nearly what they used to, but gold still is. My thinking is this. I look at gold, and silver, like an insurance against a declining dollar and everything bad that can come from it. If my gold dumped tomorrow then the economy is surely back on track and the value of my dollars increasing. I win either way. I’ll stick to this mass of yellow metal that pays no dividend and that others see as useless.
QUESTION: You often say gold is the only real money. What do you mean by real money?
ANSWER: Thanks for the question. Real money, gold/silver, can not counterfeit, devalue, or print into worthlessness like the IOU’s we carry in our wallet better known as dollars. The progression from gold to dollars was innocent enough since carrying around folded paper is much easier than heavy metal. This worked out fine when local banks could only release paper in exchange for gold. A percentage of gold had to be “on hand” for every dollar released into circulation. The idea went south as leaders (aka politicians) decided more cash was needed for pet projects and wars so this system of backing dollars with gold got scrapped. This was one of the first forms of debt. Today debt is as common as paper dollars. All because we broke away from a gold standard allowing limitless money to enter the economy.
TIP OF THE DAY: Don’t take any wooden nickels.
FAIR PRICES OF PHYSICAL GOLD & SILVER (10:45 am MST)
ONE OUNCE SILVER BULLION: $42.26
ONE OUNCE SILVER ROUNDS: $39.92
ONE OUNCE GOLD BULLION: $1509
ONE OUNCE GOLD BARS: $1474