Wait a few days to buy gold and silver

Gold, silver, oil, natural gas, and other commodity futures slid further yesterday and will slide more, but only for another few days. Then those of us worried about a store of value should add to our holdings.

Investors Business Daily has the details. Oil fell to below $100 a barrel, gas fell 7 percent, and silver lost nearly $5 per Troy ounce. Silver hasn’t slid that fast since the Hunt Brothers tried to corner silver, failed, and found themselves under arrest. Its losses three days ago caused the speculators to drop out of all the other markets.

Franklin Sanders provided another clue: the dollar index actually moved up. The higher value of the dollar might indirectly explain another result: the US stock market fell yesterday, and hard.

All this means is that the US dollar is rising against the other currencies in the index. That was no great feat, as even Sanders might not fully realize: the dollar index depends for 50 percent of its value on the euro. And the European economy is in even worse shape than our own.

Add to it that the euro has very far to fall. One euro is currently worth more than $1.48 US.

A few observations are in order. First, though oil prices have suddenly declined, gasoline prices have not. At best, they have held steady in the last twenty-four hours, when they had been rising every day for weeks. Perhaps they are high enough now that, once again, automobile buyers will take another Great Green Car Test Drive. But unless and until the Obama administration is willing to allow people to take oil out of the ground in the USA (or unless and until the American voter decides that issue by removing Barack Obama from office), motor fuel is likely to stay expensive, and that will affect the price of everything else we buy.

Second, the dollar is still fundamentally weak. All fiat currencies are weak, some more than others. But the dollar is still trending negative. Right now, the dollar might seem to be strengthening; witness its performance, over the last month, against the Israeli shekel. But that won’t last, either. To quote Sanders:

Silver will rise (my guess only) three or four times from its recent peak (yes, whip out those calculators, that equals $187.50 to $200) and gold will at least double. How much they exceed those expectations depends on just how arrogant, stupid, willfully blind and incompetent Bunglin’ Ben [Bernanke, current Chairman of the Federal Reserve Board of Governors] can be, and here’s a little tip. Just as PT Barnum quipped that nobody ever went broke betting on the gullibility of the American public, so also nobody every went broke betting on the ability of central bankers to shoot themselves and whole countries in the foot.

[amazon_carousel widget_type=”ASINList” width=”500″ height=”250″ title=”” market_place=”US” shuffle_products=”True” show_border=”False” asin=”0446510998, 0470047666, 0385512244, 0470612533, 1449555381, 1586489941, 1451542291, 047047453X, 1460954262, 193317496X” /]

That’s a long-term trend. Right now, the speculators are still bailing out, after Chicago Mercantile Exchange (Comex) abruptly forced them to put more money down when they bought silver futures on margin. (They must have thought that they were seeing Hunt ghosts.) So once again: wait a few more days, and then start buying.

One other way to protect yourself: ask your broker whether, if you buy enough gold or silver, they will protect you against another correction by adding more coins to your purchase. A reputable firm will do this, in addition to waiving shipping fees. Also: buy semi-numismatic coins whenever the law allows. (A semi-numismatic coin carries an extrinsic value that depends as much on collector interest as on the intrinsic value of the metal itself.) When President Franklin D. Roosevelt called in gold, he called in bullion bars and bullion coins only, not numismatic and semi-numismatic coins. That might not be a totally reliable precedent, but it’s better than nothing.

Sanders is half right about the long-term trend: as people watch Ben Bernanke trash the dollar, by buying US treasury bonds (a thing that would get any private bond issuer arrested if he tried it), they will look for an objective store of value. But no one should rely on any promise that any future President (or central bank chairman) makes. Any bad policy that can go into force and effect, will. Add this to it: commodities will never be worthless, but currencies, joint stocks, and bonds could be. Then our society will be saying something like this:

A loaf of wheat bread for a day’s pay, and three loaves of barley bread for a day’s pay, and be careful not to damage the oil and the wine. (Revelation 6:6)