At times you can feel “change” in the air. After years of war, it was likely a young Senator from Illinois was a frontrunner for a 2008 presidential election months before a November opportunity. Why, because change was in the air even if this change was nothing more than a flashy campaign slogan? Flashing forward, another “change” swirls but this change is less opportunistic for most but profitable for those holding wealth in physical silver or gold. My only advice is to brace yourself for this monetary change.
I can think of nothing as financially devastating, to most Americans at least, as the 2008 DJIA disastrous decline. Within months the DOW promised 15,000 only to tumble, and then tumbled even more, until a 6000ish DOW left nervous investors asking just how low can a modern-day DOW decline. The wealth and future of America was nothing short of in peril.
The winds of change today, late summer-early fall, are reminiscent of 2008. Far too many hold faith in a DJIA supported only by trust and the ability to overpopulate a currency. Also, far too many forget how quickly asset bubbles burst and investment dreams vanish.
Today we’ll compare rising gold/silver to a vanishing DOW. I’m certain both will happen, in tandem, but have no idea when. I suspect soon.
In my opinion, the most likely short-term scenario to double silver and gold’s worth is a DOW collapse. For this reason I would like to compare a DOW decline similar to 2008s to today. In return, let’s compare the effects of such a DOW decline to silver and gold accordingly.
The 2008 DOW lost over 55% of its value in the fall of 2008. This wave of uncertainty challenged gold and it, too, fell around 20%. But gold rebounded nearly 90% over the next few months leaving physical gold holders not only confident but monetarily rewarded for their good stewardship.
Percentages can be a little blurring so let’s put dollar numbers in their place. If today’s DOW dropped 55%, like in 2008, this would nestle our favorite blue chip stock average somewhere in the neighborhood of 6930. If gold, too, followed 2008′s pattern this would put gold around $1064 per ounce.
But as mentioned gold didn’t drop long, or far, until nervous investors found the one historically proven hard asset worthy of investing, and investing they did. This time will be no different, in fact, this time nervous investors will “double-down” as they realize adverse monetary effects are the new common.
After a brief decline (gold declined around 20% September 2008), gold found footing and I suspect this time will be no different. Accordingly, this would leave paper gold at $1436 (six months), at $1862 (12 months), and $2128 (18 months). I would think the physical market (premium) for gold could easily add another $200 +, per ounce, to the aforementioned dollar values. Now, this leaves silver.
The 2008 DOW meltdown pushed silver’s paper value down 50% (from $18 to $9 per ounce). But this discounting didn’t last long, nor did physical metal supplies, as new silver investors found great reward for their monetary prudence. Now, let’s plug today’s silver price into such a 2008 scenario.
If silver dropped 50% today it would leave paper silver selling at $10.75 per ounce. Within six months silver would reach $16.12 (50%), and then $20.42 (12 months), and then $21.50 (18 months)…….. according to our 2008 comparison.
But these values fail to account for rising premiums, like in 2008-09. By example, October (2008) 100-ounce silver bars carried an additional 50% +premium on the secondary market, silver Eagles even more. This pushes our $20.42 paper silver to just under $31 for physical silver ounces, at least.
Remember, the secondary PM market doesn’t care about long-term customer creation, satisfaction, or service.
The secondary market is the future of how physical gold and silver exchanges – but don’t expect bargains from those willing to sell. Typically, secondary markets grab as much as possible by taking advantage of those late to the investment party (this information, although thought provoking, is nothing more than proof how one asset correction will temporarily influence precious metals. The one long-term monetary constant is value stored in sound money via hard assets).
QUESTION: DC, I’d like to ask about safe deposit box (storage). How safe is it, actually? What will happen to stuff inside the boxes if the bank shuts down? Love your blog, anyway. It helps me to focus on long-term protection instead of short-term volatility. Thank you.
TPS Reply: I’ve waited for this question….. so thanks for asking. Make no mistake; we are nearing a point in which wealth stored in banks is at risk. This includes assets stored within bank security boxes, as well. The question is which method of storage carries more risk. Many of my readers choose bank storage because they’re not comfortable defending metal stored at home or business, this I understand.
If we must pick between the lesser of two evils I have a suggestion. Why not diversify and insure your physical metal? Insurance is available for both home and bank vault stored PM. This insurance also covers the risk of transporting the metal to and from. I’m not sure if Indonesians are eligible for this insurance so contact me if you’d like my assistance.
So far this year 18 banks have closed here in the US. All reopened, to my knowledge, under a new flag and all box contents transferred along with bank ownership. This change didn’t affect those renting deposit boxes. But we live in an age of great volatility and greater uncertainty. This means all exposed wealth will eventually be challenged by creative governments looking to find a fresh means for new taxation and wealth accumulation.
I’ve personally only used bank box storage while away on extended travel, like internationally. I weigh the risk at the time and pick between the lesser of two evils. The bottom line, I know of no 100% secure or full-proof means to store physical precious metal. This is why I recommend diversification and insurance. Thanks for the great questions and comment.
By the way, your long-term comment is spot on…… good way of approaching PMs.
COMMENT: Metals are rising!!!!!!
TPS Reply: They are, and this is a good confidence boost for those new to PM. I can’t tell you how many emails TPS has received from new readers who bought discounted PM only because of this last PM correction. I know many readers are frustrated but the opportunity to buy discounted metal truly allowed more to join the PM table.
Gold and silver rising is great but pale when compared to the advantages of discretely storing wealth out of sight. All exposed wealth is now under threat of taxation, confiscation, and blame. Why not take advantage of this temporary opportunity to trade dollars for unregistered wealth (physical silver or gold)? Not to mention the opportunity to store this wealth in many different countries, and outside the banking system.
DC Carlton is founder of The Prospector Site and author of the Amazon Kindle #1 Bestsellers Why Silver and Gold Will Go Higher and Storing Silver & Gold. If you’re looking for trustworthy PM assistance feel free to contact DC regarding his personalized consulting service. TPS doesn’t sell silver or gold; we represent you, the buyer, looking for affordable precious metal from honest trustworthy sources. Feel free to register here for his free online newsletter that provides precious metal insight rarely mentioned from mainstream media sources.