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What a DOW decline means for GOLD

GOLD & SILVER, SECURING GOLD & SILVER, STOCKS AND GOLD/SILVER   No comments yet

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.

GOLD:

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.

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.

 

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TOO MUCH SILVER?

BUYING GOLD/SILVER, GOLD & SILVER   No comments yet

The truth is sometimes those who preach the benefits of silver and gold repeat the same old same old. PMs (precious metals) do not have the exclusive on misinformation. Since the beginning of time hunters have exaggerated size of the beast or danger of the kill. Flash forward a few thousand years and the internet provides a breeding ground for the misinformed, this includes precious metal actuality. The challenge for you, the reader, is to sift through fact from fiction, bias from objective. This can be challenging for you and me. 

TPS (The Prospector Site) attracts those new to PM in search of more information in hopes of making prudent monetary decisions in an age of economic uncertainty. But some readers are more advanced, PM speaking, and present challenging questions to say the least. One such challenge leads us to ask if too much physical silver exists.

Let me begin by saying Happy New Year to all and thanks for spending a few minutes in search of PM accuracy. I commend each of you for making such a wise decision to at least explore the relativity of silver and gold today. We often discuss how to buy, what to buy and how to safely store silver/gold so feel free to dive into TPS archives for more info or email me, DC Carlton, if you prefer.

The question is how can we accurately compare silver availability to demand? In other words, is physical silver demand greater than mining output or potential output? Plus, is mining output supplemented by an increasing supply of scrap silver, as well? More importantly, how will production and demand effect the value of your stack of silver bullion, rounds or bars?

All great questions, all worthy of an answer, too. Unfortunately, not one person walking God’s green earth knows the answers to the above questions since even those spending a lifetime researching such issues disagree. So, this leaves us with only one last option but fortunately it’s the best option.  This is why we’ll do our best to answer the above questions by evaluating the facts.

Fact #1. Silver demand is very relative. Even so-called experts can only estimate future demand. These experts usually base such demand on trends more than anything else, and for one reason. You, my friend, are hard to figure out….monetarily speaking.

Demand is relative to so many things. I would have never believed America would re-elect a president (regardless political affiliation) who approved increasing the national deficit nearly as much in one term as all previous presidents…..impossible. This only proves how quickly opinions change once a society reaches a point of spending addiction.

Natural disaster experts will attest that folks under extreme adversity will eventually broaden opportunity in order to survive. Those with wealth will do exactly the same as they realize their vessel of wealth storage is at risk of sinking.

I still recall the meal in Beijing, China just a few short years ago listened to a couple of European land developers describe the mania of new construction along Spain’s coastline. Now, Spain suffers from catastrophic economic decline with millions taking to the streets.

It’s impossible to factor future demand as our world changes so quickly…..and awakens to the fact another option exists for wealth storage. The ability to trade currency for silver is a growing force more powerful than most imagine. So often we hear of overreaching government chipping away at civil liberties but few connect how a storage of PM wealth is the ultimate liberator.

The combination of sound money liberation and a second currency option fuels the demand side of silver as folks realize the US Dollar has reached retirement age. I only mention this because the USD has lost 95% of its value since the creation of our Federal Reserve Bank.

The world is on the verge of discovering the one currency not negatively affected by monetary debasement and fiscal irresponsibility.

Technology and silver you ask. Even those who support silver’s technological play underestimate silver’s true potential as our world connects via smart phones and tablets. This technology thirsts for silver even it’s only minuscule amounts at a time. TPS often mentions how silver and gold are off the radar but in today’s information age the power of silver and gold are soon uncontainable. The same devices made of silver also help spread the benefits of investing in physical silver.

Fact #2: Silver doesn’t care. Silver doesn’t care if it’s a great wealth equalizer for a central bank or a fellow living in Kansas City. Silver cares not who claws it from the ground or who buries it in their backyard. Silver is an emotionless opportunity of wealth preservation in an age of wealth destruction. Like our European developers, we like to assume silver will always be available but the facts say otherwise.

Latin America’s mining industry blazes in conflict. International mining corporations pour into Latin America but conflict arises when locals question fair wages and long-term environmental impact. It really comes down to greed as even the impoverished understand rising silver demand has the ability to pad empty pockets.

Raise your hand if you truly believe environmental issues will not grow more relevant worldwide. Clean air and water will prevail over mining compromise and this equals one simple outcome. It will grow harder, even in our technological age, to abstract hunks of silver from under the earth’s surface.

Last Words: Well, these are the facts folks. No matter how much silver rests below the ocean floor or planet’s surface it doesn’t change the impact of enormous demand. Silver is now under assault from technological components and from folks, like you, looking for sound money in an age of imaginary currency.  My opinion (yes I saved it for last), it’s impossible to have too much silver when 100% of the world’s currency is intrinsically worth zero.

 

 

DC Carlton is the founder of The Prospector Site and author of Why Silver and Gold Will Go Higher. Feel free to register here for his free online newsletter that provides precious metal insight rarely mentioned from mainstream media sources

 

 

 

 

 

 

 


 

 

 

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