Gold and silver sell off, but not forever

Gold and silver sold off again, after many large investors moved to bonds. But the time might soon come to buy.

Gold and silver down

Gold lost $8.80 per ounce to $1,481.80, and silver lost 48.2 cents per ounce to $33.65. As your editor writes this, gold has come back to $1485.35 (down $5.05), and silver has come back to $34.13 (no change).

Franklin Sanders has warned his readers to expect both metals to decline for another month, two months, or three months. Today gold fell harder than it has fallen lately. But this does not mean that gold will fall to year-2000 levels. Gold will never be worthless, and will rise again, as the dollar does become worthless.

What moves gold and silver?

Gold has very few industrial uses. It has at least one medicinal use: patients with some forms of arthritis do better when they take gold salts. But gold is rare, and gold does not rust or tarnish. Those are what make it a historical store of value.

Silver is also a traditional store of value, but it also has industrial uses (beyond making knives and forks out of it). That’s why the economy can affect silver more than gold. The gold-silver ratio (price per ounce of gold divided by price per ounce of silver) is a good measure of the health of the economy. Right now that ratio is higher than 40, and that shows a very sick economy.

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What happened today?

Today, most speculators sold gold and silver for special reasons:

1. With the economy slowing down and people spending less and driving less, everyone was selling off oil and buying bonds. Holders of gold, silver, and baser metals (like copper) did the same. (Except that speculators also bought foodstuff futures, knowing that the Mississippi floods will ruin much of the country’s wheat and other crops.)
2. George Soros and several other “hedge fund” managers sold half their shares in gold-backed mutual funds. George Soros never buys or sells anything without a reason, and that reason has to do not so much with making a profit as with supporting his political friends. The many media outlets that he supports have said many times that gold and silver are scams. Maybe today he wanted to make that illusion look more “real.” (Or maybe this is part of his game to create the “Amero,” a joint peso-USD-CAD currency.)
3. The US dollar changed little. The reason: while the US dollar is sick, the euro and the yen are even sicker.

This sort of thing will happen again for a few weeks longer. But even George Soros can’t prop up the dollar forever, not while Ben Bernanke at the Federal Reserve monetizes the debt. Only if Congress refuses, no matter what deal the President offers, to raise the debt ceiling, will they save the dollar from “Weimar-izing.”

The future

The experts whom your editor trusts still recommend: Hold gold and silver for now. George Soros’ decision to sell is not a signal for anyone else to sell (or to buy—yet). And when any “expert” dares tell you that a piece of paper is a better store of value than metal that you can hold in your hand, avoid him—he’s a con artist. Right now, as long as George Soros and the Arabs are willing to prop up the dollar, it’s time to hold what metals you have, pay down your debts, and gather cash. You have 30 days, or 90 at the outside.

The metals will turn around, then fall back, then rise again after they have shaken off the last of the speculators. That’s the time to buy.

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And that time might come even sooner. The Middle East might explode into a Fourth (Fifth? Sixth?) Arab-Israeli War. The Arabs might then dump US Treasury paper, refuse to sell oil to the USA or Israel at any price, and refuse to sell oil to anyone else except for gold, or maybe for euros or yuan or rubles or a joint Sino-Russian currency. No one will want that event to catch them flat-footed. So if Egypt starts running guns into Gaza, or if it once again closes the Straits of Tiran, watch out!