The Gold And Silver Avalanche

Posted | 26/09/2012 / Views | 2658
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At a moment where more and more news is coming out regarding currency wars, political unrest, and the devotion of the FED to an unlimited, open-ended quantitative easing blood transfusion to a fundamentally insolvent banking system-you have got to learn something folks, and that is this: they are going to print all that it takes until hyperinflation sets in.

At the same time, please don't let anyone dissuade you regarding some sort of "bubble" in the precious metals. In 1980, the value of gold in the U.S. exceeded the market cap of stocks (briefly in January of that year). What would the price of gold be today, if this documented relationship occurred again? Somewhere close to 20,000 dollars an ounce!

Taken together with the combination of increasing uncertainty regarding mine output increases, the woeful underinvestment of nearly everyone from retail investors right up to central banks in precious metals, plus the online brokerage/margin revolution leading millions of more people into this market in some form, we could certainly see a magnitude move higher in the gold price to far greater than $20,000 someday.

And don't even get me started on silver. If we assume the same 16 to 1 relationship that also existed in 1980, then 20,000 dollar gold means 1,250 dollar silver. Not a bad return on an asset currently trading beneath 35 dollars an ounce.

In the end, I think about the price of precious metals as a potential avalanche. You have had several gun shots fired in the direction of the unstable slope of ice, but so far only a few bits of snow have come down. But we are only so many gun shots away from the avalanche roaring with the determination only an avalanche can bring, and when it does, it will likely far exceeded the relentlessness of the move in precious metals from roughly 1977 to 1980. In that period the price only went one direction- and that was straight up, day after day, month after month. Gold moved from roughly $140 to $850 with some corrections, but they didn't last long and they more or less ripped the heads off of those with a short position- so there was essentially a "short strike"(if that term exists). People were talking about price corrections, or looking for a more "sane" place to get in, but they were repeatedly shown that markets have a life of their own.

I hope you are willing to learn this lesson about mass psychology as it applies to gold and silver- and invest accordingly.


Source: http://www.gold-eagle.com/editorials_12/jordan092112pv.html