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“Cash for Gold!”  You’ve seen the signs pop up all around town, you’ve seen the ads on TV and heard them on the radio.  “Sell your Gold to us, we pay top Dollar” and “Sell it now before it drops in price,” has been the battle cry for going on 4 years now.  In fact, this has been an even bigger event over in Greece, Spain and Italy.  People have been selling their “family jewels” just to survive financially or to just even eat for the week.  I can remember a few years back when the Gold bears were screaming “top” (as they have so many times and for so many years) because there were advertisements by coin dealers.  This was supposed to be the death knell, the “public” was getting involved so the move was over… or was supposed to be.  Without going on too much of a tangent, the public is still very uninvolved in precious metals.  So much so that if I had to guess, more weight has been sold to “Cash for Gold” shops than has been purchased but I have no way to quantify this.

But why did these shops pop up all over the place?  The obvious reasons are that Gold can be purchased from an unsuspecting public for under $1,000 per ounce and the “need” is there for a buyer of convenience because the economy and markets have been so poor for so long now.  Selling grandma’s ring or necklace because your credit card is maxed out has been a way to prolong “the lifestyle” or to just survive.  There is certainly a profit motive involved because you have a public that is looking at their jewelry as “found money” and when they hear “take it or leave it” from the buyers, where else do they turn?

Then you have cynical knuckleheads like myself who see this as the last crumbs being hoovered up and off of the streets.  This “street cleaning” clears the way for Gold to be taken up and out of reach of the masses when the revaluation takes place.  You have heard the old saying that “bull” markets shake as many as possible off it’s back in order to carry as few as possible to riches and wealth.  This has always been true but in this instance, a population that has already sold their Gold is “unarming” themselves so to speak.  A population without metal has very little means of defending themselves against a hyperinflation and this is exactly what a government heading towards Socialism wants, sad to say.

The fact that this phenomena began in earnest roughly 4 years ago and Gold prices have been above $1,000 (the stratosphere!), it leads me to believe that the vacuum cleaner is nearly full up and the public who was or needed to sell has already done so for the most part.  This is so sad and nearly mirrors what has happened largely to the economies of the West.  The West (in particular the U.S.) has shipped their manufacturing overseas to the East and squandered nearly 150 years of hard work by our previous generations.  By selling jewelry at below market prices is the equivalent of “giving away” the family jewels that were accumulated personally and by previous generations.  Meanwhile, anecdotal evidence is mounting that Western governments are also playing this game, only it’s called “Gold for cash.”  They’ve been selling their Gold in order to create the impression that their “cash” actually has value.

Of course there is a flip side to this.  The “buyers.”  We know for a fact that Eastern governments have been accumulating Gold and their citizens have also.  India has always valued Gold jewelry for savings and now the Chinese population is following with the blessing of their government.  Gold, just as manufacturing has, is flowing from West to East.  With this flow unfortunately includes both economic and financial power.  If history is any guide, this shift in power will last generations, not years.  It did not have to be this way but this is what happens when you worry about this quarter’s earnings as opposed to your unborn great grandchildren’s futures.

P.S. A correction to a piece that I wrote last week:  I stated that the central banks “claim” to have 30,000+ tonnes which was about 30% of all Gold ever mined.  The fact is, 30,000 tonnes only represents about 20% of all Gold ever mined.  My error only strengthens the argument that very little Gold (maybe far less than we are being told) is holding the financial system up and that central banks will be overwhelmed by their own creations (currency and credit).